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2022 Annual Conference

del 19 al 21 de May del 2022

Sheraton Sand Key, Clearwater Beach, FL, US

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B1a Factors That Impact Defined Contribution Equity Percentage: A Bayesian Model Averaging Approach

jueves, el 19 de mayo de 2022 a las 17:15–18:45 EDT
Room 1
Key Words

risk, equity percentage, Baysian Model Averaging

Short Description

The impact that demographic and socioeconomic variables have on equity percentage, after risk preferences have been netted out, are analyzed using portfolio data from defined contribution (DC) plans. First, we regress DC equity percentage on investor risk preferences in order to obtain surrogate residuals. Second, we use a Bayesian Model Averaging approach to analyze the association between demographic variables and those surrogate residuals. Using cross-sectional data from Morningstar Associates that span the Great Recession, we find that age and the use of an allocation fund (e.g. target-date fund) are negatively associated with DC equity percentage. In addition, we find that the level of the S&P 500, DC deferral (savings) rate and salary are all positively associated with DC equity percentage.

Submitter

Michael Guillemette, Texas Tech University

Authors

Michael Guillemette, Texas Tech University
Donald Lacombe, Texas Tech University
David Blanchett, PGIM
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