The Impact of Individual Investment Behavior for Retirement Welfare: Evidence from the United States and Germany



characteristics, both as observed in life insurance purchases and in a speculative job
choice option. They observe that women are more risk averse than men in both
domains,5 and that risk aversion is U-shaped in age. Higher education appears to
increase risk aversion with regard to pure risk; yet, regarding speculative risk,
education tends to increase the willingness to accept it. Halek and Eisenhauer (2001)
also observe that immigrants tend to be greater risk takers than nonimmigrants. They
attribute this behavior to the self-selection aspect of immigrating in the first place.

In the pension domain, Bajtelsmit and VanDerhei (1997) use data on asset allocation
choices in U.S. pension plans and find that investments in risky assets increase if the
respondent is male, middle-aged, and wealthy. Hinz, McCarthy, and Turner (1997)
find that women exhibit more risk aversion when making choices for assets in a U.S.
pension fund. Employing a proprietary data set of U.S. 401 (k) pension plan choices,
Agnew, Balduzzi, and Sunden (2003) find that men invest more in equities and trade
more frequently than do women. They also find that being married and having higher
income is associated with more aggressive investing behavior. Older age, however,
leads to greater caution in asset allocations.6 Van Rooij, Kool, and Prast (2007) show
that, in the Netherlands, men are generally less risk averse and would (if no
restrictions forbade it) invest more in stocks than women and prefer a defined
contribution plan to a defined benefit plan. For Australian investors, Watson and
Naughton (2007) show that men choose riskier retirement plans.

In the individual investment domain, using data from the 1998 wave of the Survey of
Consumer Finances (SCF), Sunden and Surette (1998) investigate probabilities to
invest mostly in stocks or mostly in bonds. Their results highlight marital status as a
driver for investment behavior. Single men are more likely than single women and
married men to invest mostly in stocks; married women, however, do not differ

5 The overview of the psychological literature given in Byrnes, Miller, and Schafer (1999)
summarizes broad evidence that women exhibit more risk aversion than men.

6 The results of Ameriks and Zeldes (2004) support this finding. Poterba and Samwick
(2001) and Bertaut amd Starr-McCluer (2002), however, find a hump-shaped asset
allocation pattern associated with age.



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