Robert L. Clark|Annamaria Lusardi|Olivia S. Mitchell
Financial knowledge and 401(k) investment performance: a case study
George Washington University|University of Pennsylvania
abstract explore whether investors financially knowledgeable earn retirement plan investments compared less sophisticated counterparts using unique new dataset linking administrative data investment performance financial knowledge results show financially knowledgeable investors held 18 points stock least knowledgeable counterparts b could anticipate earning 8 basis points per month excess returns c 40 higher portfolio volatility held portfolios 38 less idiosyncratic risk compared least savvy counterparts results qualitatively similar controlling observables well modeling sample selection also examine portfolio changes assess potential impact financial literacy intervention controlling factors elected take financial literacy survey boosted equity allocations 66 basis points monthly expected excess returns rose 23 basis points significant difference volatility nonsystematic risk detected versus survey findings relate one firm anticipate may spur efforts enhance financial knowledge workplace