Racial Differences in Risky Asset Ownership: A Two-Stage Model of the Investment Decision-Making Process

15 Pages Posted: 13 Mar 2013

See all articles by Michael S. Gutter

Michael S. Gutter

University of Wisconsin - Madison - School of Human Ecology

Angela Fontes

University of Wisconsin - Madison - Department of Consumer Science

Abstract

The current study establishes a two-stage investment decision-making model in order to examine the impact of race on investment behavior. Results show that although Blacks are less likely to own stocks than Whites, once ownership is accounted for, there is no difference in the portfolio allocation to risky assets. The model indicates racial disparities in risky asset ownership, which may be attributable to differences in information exposure and barriers to investment markets. The results suggest that a voluntary savings initiative accompanied by a graduated savings component could help remove investment barriers and enable access to more productive investments.

Keywords: investor behavior, portfolio allocation, race, risk tolerance, stocks

Suggested Citation

Gutter, Michael S. and Fontes, Angela, Racial Differences in Risky Asset Ownership: A Two-Stage Model of the Investment Decision-Making Process. Journal of Financial Counseling and Planning, Vol. 17, No. 2, 2006. Available at SSRN: https://ssrn.com/abstract=2232188

Michael S. Gutter (Contact Author)

University of Wisconsin - Madison - School of Human Ecology ( email )

1225 Observatory Drive
Madison, WI 53706
United States

Angela Fontes

University of Wisconsin - Madison - Department of Consumer Science ( email )

United States

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