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Identifying heuristic choice rules in the Swedish premium pension scheme

Conference paper
Authors Tommy Gärling
Martin Hedesström
Henrik Svedsäter
Published in Paper presented in the workshop “Research on the new premium pension system”, Stockholm Institute for Financial Research, Stockholm School of Economics, Stockholm.
Publication year 2004
Published at Department of Psychology
Centre for Consumer Science
Language en
Keywords Behavioral finance, Swedish premium pension scheme, decision making
Subject categories Social Sciences

Abstract

The paper presents the results of analyses of citizens’ actual choices in the Swedish premium pension scheme (PPS) (Hedesström et al., 2004) and as revealed in an Internet-based survey of fictitious choices among fund categories. Findings indicated the prevalence of a default bias, the use of a diversification heuristic, a home bias, and the use of a 1/n heuristic. In the survey it was also shown that involvement in the PPS, measured by self-rating scales, increased with the amount to invest but decreased with age (proximity to retirement). Involvement furthermore decreased the likelihood of choosing the default fund and was positively correlated with the number of chosen funds. Naïve risk diversification, the home bias, and the 1/n heuristic were however unaffected by involvement

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