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Upcoming and Past PCaMS Seminars.
Location: PWBM’s DC Office
Date / Time: Thursday, February 20, 12:00 PM - 1:30 PM
Jon Huntley is Senior Economist with Penn Wharton Budget Model. Prior to PWBM, Jon was part of the Fiscal Studies Unit at the Congressional Budget Office and specialized in building models to analyze the effects of changes in fiscal policy on the economy. Jon’s academic research focuses on household finance and how household savings and consumption decisions are affected by economic frictions. His research on how tax-deferred retirement savings accounts encourage households to spend out of anticipated changes to income such as tax rebates has been published in the American Economic Journal: Macroeconomics. Jon received his Ph.D. in economics from Northwestern University and his B.S. in mathematics and economics from Duke University. He will present his paper “What Drives Investors to Chase Returns?”
What Drives Investors to Chase Returns?
Abstract: Using data on one-participant retirement savings plans, we identify a behavioral bias in savings decisions. Investors who earn top-decile returns increase contributions to their accounts more than other investors. Using multivariate regression analysis, we show that such a ``return chasing'' behavior is robust to controlling for financial illiteracy, macroeconomic conditions, learning, transaction costs, housing prices, and informational frictions. We use a structural two-asset model with tax-deferred and taxable assets to show that a permanent increase in expected returns produces investment responses for younger or liquidity constrained investors that are consistent with our data. Overall, this provides evidence for recent portfolio experiences affecting the formation of expectations.