Chapter

Being in the Market

Gordon L. Clark, Kendra Strauss and Janelle Knox-Hayes

in Saving for Retirement

Published in print January 2012 | ISBN: 9780199600854
Published online May 2012 | e-ISBN: 9780191738104 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199600854.003.0005
Being in the Market

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In this chapter we develop a model of behavior in time and space that allows for the coexistence of different types of response to changing market conditions. From the “sophisticated” market players introduced in Chapter 4 through to “naïve” and “myopic” players, our framework allows for the categorization of behavior at the intersection between cognition and context. It is apparent that some people anticipate the future, put in place the so-called “safety first” strategies to manage the downside risks associated with market turmoil, and have an understanding of the world that is able to bridge the local and the global. These people are, however, unusual. Through a study of the retirement savings strategies of employees in a London-based investment firm, we show that they are of a younger age, have the advantages of income and property assets, and can distinguish between the short term and the long term. From these findings, we are able to explain why, even in the most significant financial crisis since the great depression of the 1930s, not all market players were “victims” of market volatility. This chapter focuses on the interaction between various forms of retirement saving and investment, emphasizing the role of property in savings portfolios. Because of the distinctive tax treatment of buy-to-let property, it is reasonable to suppose that this form of long-term saving complements other types of retirement saving.

Keywords: market behavior; savings strategies; property

Chapter.  9409 words.  Illustrated.

Subjects: Pensions

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