Hispanic Culture, Portfolio Decisions, and Asset Prices
89 Pages Posted: 16 Dec 2016 Last revised: 20 Aug 2020
Date Written: August 19, 2020
We examine the impact of culture on portfolio decisions and asset returns, focusing on the large and growing Hispanic population in the United States. We find that both retail and institutional investors in high Hispanic neighborhoods overweight local, lottery-type, and high-momentum stocks and their trades are more strongly correlated. Systematic Hispanic trading generates excess return comovement among locally headquartered firms. We also find evidence of higher local stock returns, a stronger negative lottery-stock premium, and larger momentum returns in high-Hispanic areas. Collectively, these findings suggest that evolving ethnic demographics affect U.S. capital markets.
Keywords: Hispanic culture, demographic shifts, local bias, lottery stocks, return comovement, local returns, return momentum
JEL Classification: G11, G12
Suggested Citation: Suggested Citation