Who is internationally diversified? Evidence from the 401(k) plans of 296 firms

Drawing on a novel database of the 401(k) plans of 296 firms, we examine the international equity allocations of 3.8 million individuals over the 2005-2011 period. We find enormous cross-individual variation, ranging from zero to more than 75%, and strong cohort effects, with younger cohorts investing more internationally than older ones and each cohort investing more internationally over time. Access to financial advice, lower fees, and more international fund choices are associated with higher international allocations, suggesting a role for plan design and policy. Education, financial literacy, and the fraction of foreign-born population in the ZIP code also have positive effects on international diversification, consistent with explanations based on familiarity bias and information barriers.