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Return Chasing as a Driver in Individual Retirement Savings Investment Choices: Evidence from Australia

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Abstract

Australia’s retirement savings regime requires employers to make contributions to a superannuation fund for their employees. Workers who may have no experience of investment are asked to make relatively complex decisions, which have significant implications for their retirement lifestyle. Evidence suggests individuals may be unduly influenced by recent historical returns when making investment choices. Such a bias may produce sub-optimal results over the longer-term. This paper uses a large database from four not-for-profit retirement savings funds to investigate members’ investment choices using logistic regression and multi-variate tests. We find evidence that choices are driven by recent historical returns. We also investigate demographics and find a link between age and return chasing behaviour.

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Acknowledgments

The authors gratefully acknowledge the support of AustralianSuper, GESB, HESTA and UniSuper, and in the conduct of this research. We would also like to thank Jacqui Whale for her excellent work on complex databases.

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Authors and Affiliations

  1. School of Accounting, Finance and Economics, Edith Cowan University, 100 Joondalup Drive, Joondalup, WA, 6027, Australia

    Marilyn Clark-Murphy & Paul Gerrans

  2. School of Psychology, Edith Cowan University, Joondalup, WA, Australia

    Craig Speelman

Authors
  1. Marilyn Clark-Murphy
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  2. Paul Gerrans
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  3. Craig Speelman
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Correspondence to Marilyn Clark-Murphy.

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Clark-Murphy, M., Gerrans, P. & Speelman, C. Return Chasing as a Driver in Individual Retirement Savings Investment Choices: Evidence from Australia. J Fam Econ Iss 30, 4–19 (2009). https://doi.org/10.1007/s10834-008-9133-8

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