Finance Seminar: Riccardo Sabbatucci, Stockholm School of Economics
Title: Shifting From Active to Passive: How Retirement Plans Impact Equity Prices
Info about event
Time
Location
Universitetsbyen 51, 8000 Aarhus C, Building 1816, Room 613
Organizer
Presenter: Riccardo Sabbatucci, Stockholm School of Economics
Title: Shifting From Active to Passive: How Retirement Plans Impact Equity Prices
Abstract: Defined contribution plans are now the dominant U.S. retirement saving vehicle, with $12tn in assets as of 2024. Concurrently, many institutional investors have shifted toward passive investment strategies. This paper studies how reallocations from active to passive within 401(k) plans affect equity prices. Using detailed data on 401(k) fund offerings, we find that this shift induces aggregate price changes of about 10%. Stocks overweighted by active funds decline, driven by both direct outflows and lower stock-level 401(k) ownership—an important driver of investor demand. The results underscore the implications of changes in pension plan investment behavior for equity market outcomes.
Host: Niels Strange Grønborg