Risk Tolerance and the Investment Behavior of Black and Hispanic Heads of Household

Abstract

Attitudes toward risk and willingness to hold risky assets are compared for white, Hispanic, and black heads of household using data from the 1998 Survey of Consumer Finances. Results indicate that Hispanic heads of household evidenced a significantly higher level of risk aversion and held a significantly lower percentage of risky assets to net worth. Contrary to prior research, the results for black heads of household were not significant when we control for the level of household wealth suggesting that, although blacks may hold different types of assets than whites, they are not necessarily more risk averse.

Keywords: Risk tolerance, racial differences, asset allocation