December 2002


New York, NY - December 10, 2002 - Are stocks safe for long-term investors? How do people make savings decisions in their 401(k) plans? These are two of the important issues addressed by this year’s winners of the annual Paul A. Samuelson Award for Outstanding Scholarly Writing on Lifelong Financial Security.

The seventh annual award, which is administered by the TIAA-CREF Institute, continues the emphasis placed by the judges and the Institute on original work with practical implications for individuals and financial planners.

The two sets of authors who share this year’s prize are John Y. Campbell and Luis M. Viceira for their book, "Strategic Asset Allocation: Portfolio Choice for Long-term Investors" (Oxford University Press); and Brigitte C. Madrian and Dennis F. Shea, for their article, "The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior" in the November 2001 Quarterly Journal of Economics. The four winning authors will each receive an equal $7,500 share of the $30,000 cash prize.

Messrs. Campbell and Viceira provide a solid theoretical foundation for practical asset allocation advice based on modern analytical and numerical methods. They show how rigorous financial theory and econometrics can be applied to produce real-world prescriptions, and in doing so, they justify—but also clarify and qualify—conventional investing wisdom (for example, that stocks are a safer investment over the long term). Their book makes a strong argument that a solid theoretical framework is crucial for helping investors make the right investment choices, noting that, "Traditional financial planning rarely accompanied by an explicit statement of the beliefs that support the advice. Investors are likely to make better decisions if they understand what they must believe about the world in order to accept a recommended portfolio."

"The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior" demonstrates that the automatic enrollment of employees in a 401(k) plan can exert a strong influence over their saving and investment choices. Under automatic enrollment, employees must choose to opt out of, rather than opt in to, a voluntary savings plan such as a 401(k). They still can control their portfolio allocation and savings rates. The research shows that after the introduction of automatic enrollment, many new employees simply accept the automatic or "default" saving and portfolio options established by the plan administrators, rather than making another, perhaps better, choice. Madrian and Shea’s research shows that such automatic aspects of retirement plans could have a tremendous impact on the distribution of retirement savings available to individuals.

A certificate of excellence was awarded to Kent Smetters for his article: "Controlling the Cost of Minimum Benefit Guarantees in Public Pension Conversions," which appeared in the Journal of Pension Economics and Finance in March 2002. Professor Smetters’ research clarifies and quantifies the sizable risks that public pension systems assume when they make minimum-benefit guarantees, and the article provides some insight as to how these costs can potentially be reduced.

John Y. Campbell is Otto Eckstein Professor of Applied Economics, Department of Economics, Harvard University, and Luis M. Viceira is an Assistant Professor of Finance, Harvard Graduate School of Business Administration. Brigitte C. Madrian is Associate Professor of Economics, University of Chicago, and Dennis F. Shea is the head of executive compensation strategy and client services, Aetna, Inc. Kent Smetters is Assistant Professor of Insurance and Risk Management, The Wharton School, University of Pennsylvania.

The Paul A. Samuelson award will be presented at the Allied Social Science Associations annual meeting at the Washington Grand Hyatt on January 3, 2003. The winner of the award is determined by an independent panel of judges, and the competition is administered by the TIAA-CREF Institute, the research and educational arm of the TIAA-CREF organization. The award was named after Nobel Prize winner Paul Samuelson in honor of his achievements in the field of economics, as well as for his service as a CREF trustee from 1974-85.

Six noted scholars served as judges for the 2002 award: Dora Costa, Associate Professor, Massachusetts Institute of Technology; Alan L. Gustman, Loren M. Berry Professor of Economics, Department of Economics, Dartmouth College; Mark V. Pauly, Bendheim Professor of Health Care Systems, The Wharton School, University of Pennsylvania; Robert W. Vishny, Eric J. Gleacher Distinguished Service Professor of Finance, Graduate School of Business, University of Chicago; David A. Wise, John F. Stambaugh Professor of Political Economy, John F. Kennedy School of Government, Harvard University; and Stephen P. Zeldes, Benjamin Rosen Professor of Economics and Finance, Graduate School of Business, Columbia University.

TIAA-CREF is the premier pension system for people employed in education and research in the U.S., serving approximately 15,000 institutions and 2.5 million participants. The organization also serves the general public with mutual funds, annuities, IRAs, insurance, and trust services, and is the leading manager of state-sponsored college saving programs.

Media Contact:
Patrick Connor, 1 212 916-5769; email:

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