Pensions and Risk Aversion: The Influence of Race, Ethnicity, and Class on Investor Behavior
Dorothy A. Brown
Washington and Lee University School of Law
Lewis and Clark Law Review, Vol. 11, 2007
Washington & Lee Legal Studies Paper No. 07-04
Defined Contribution plans have greatly expanded over the last two decades. Defined Contribution plans place the investment risk on employees. Employee investment decision making should be examined to determine whether those decisions are influenced by race, ethnicity and/or class.
Empirical data show that investor behavior is greatly influenced by race, ethnicity and/or class. Blacks and Hispanics are far less likely to invest in the stock market than whites. Low-income whites are far more likely to invest in the stock market than blacks or Hispanics regardless of income. As a result, retirement account balances are the greatest for many white households and the least for black, Hispanic, and certain white households. This article explores those issues and suggests solutions that will allow employees to overcome their built-in biases and make wiser investment choices.
Number of Pages in PDF File: 28Accepted Paper Series
Date posted: January 11, 2007
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