Hispanic Culture, Stock Preferences, and Asset Prices
77 Pages Posted: 16 Dec 2016 Last revised: 21 Jan 2019
Date Written: January 17, 2019
We examine the effect of Hispanic culture on portfolio choice and asset returns in the United States. Using the minimum distance from the Canadian border as an instrument for an area's Hispanic concentration, we show that Hispanic investors are more likely to invest in local, lottery-type, and high-momentum stocks than the average U.S. investor. Their trades in these stocks are correlated and generate return comovement that cannot be explained by fundamentals. Additionally, Hispanics' return chasing behavior leads to pronounced momentum returns among firms headquartered in high-Hispanic areas. Overall, these findings suggest that evolving demographics are important for capital markets.
Keywords: culture, style investing, local bias, lottery stocks, comovement, momentum
JEL Classification: G11, G12
Suggested Citation: Suggested Citation