Social Risk and Portfolio Choice

82 Pages Posted: 3 Nov 2016 Last revised: 5 Dec 2018

See all articles by William J. Bazley

William J. Bazley

University of Miami

Yosef Bonaparte

University of Colorado at Denver - Department of Finance

George M. Korniotis

University of Miami; Miami Business School; University of Miami - Behavioral Decision Making Cluster

Alok Kumar

University of Miami - School of Business Administration

Date Written: December 4, 2018

Abstract

Experimental and field data suggest that a social factor, discrimination, affects the risk perceptions and portfolio decisions of U.S. households. Experiments indicate that minorities perceive greater income risk. Minorities with relatively high risk perceptions are 10% less likely to invest. Discrimination further lowers the stock ownership of minorities by 2-5%. For White heterosexual males, there is no relation among perceived income risk, discrimination, and stock ownership. Results using field data support the experimental evidence, indicating that discrimination reduces stock ownership among minorities by 4-8%. The economic significance of socially-amplified risk perceptions is comparable to that of income and education.

Keywords: Stock market participation, asset allocation, income risk, subjective probabilities, household finance

JEL Classification: D14, D81, G11, J15, J16

Suggested Citation

Bazley, William J. and Bonaparte, Yosef and Korniotis, George M. and Kumar, Alok, Social Risk and Portfolio Choice (December 4, 2018). 7th Miami Behavioral Finance Conference 2016. Available at SSRN: https://ssrn.com/abstract=2863351 or http://dx.doi.org/10.2139/ssrn.2863351

William J. Bazley

University of Miami ( email )

Coral Gables, FL 33124
United States

Yosef Bonaparte

University of Colorado at Denver - Department of Finance ( email )

United States

George M. Korniotis (Contact Author)

University of Miami ( email )

P.O. Box 248094
Coral Gables, FL 33124-6552
United States
305-284-5728 (Phone)

Miami Business School ( email )

University of Miami - Behavioral Decision Making Cluster ( email )

5250 University Drive
Coral Gables, FL 33124
United States

Alok Kumar

University of Miami - School of Business Administration ( email )

514 Jenkins Building
Department of Finance
Coral Gables, FL 33124-6552
United States
305-284-1882 (Phone)

HOME PAGE: http://moya.bus.miami.edu/~akumar

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