Status Quo Bias on Retirement Investment Decisions at Great Zimbabwe University, 2020

Abstract

The study sought to understand how the status quo bias affects the financial decision making behaviour of employees. A sample of 154 university employees were studied to find out how they would choose investment opportunities for their pensions. Short questionnaires were emailed to sampled employees and responses were expected within a week.The study was largely descriptive in nature and it used the simple regression model to analyse the relationship between investment decisions and employee attributes. The study was limited by the sampling technique used as not all staff could be accessible during the covid 19 pandemic but the high response rate made generalization of findings possible. It was found out that with small choice sets, individuals may still prefer their known investments without rationally weighing the options. The regression results show that most of the variables are not significant in explaining the decisions to invest by employees showing lack of rationality. The results also showed that most employees were not rational in their investment decisions as they did not weigh retirement options that gave the greatest return but they opted to remain in the investment that their employer had chosen for them previously. The results confirmed the existence of status quo bias in investment decisions. The study confirms that apart from cost beneanalysis individual decisions are influenced by cognitive biases. The study could also be replicated on a larger scale in future.