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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