Hispanic Culture, Portfolio Decisions, and Asset Prices
100 Pages Posted: 16 Dec 2016 Last revised: 13 Jun 2022
Date Written: February 2, 2022
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. Their systematic trades in these stocks generates excess return comovement that is unrelated to firm fundamentals. We also find evidence of higher local stock returns, a stronger negative lottery-stock premium, and larger momentum returns among firms headquartered in high-Hispanic areas. Collectively, these findings suggest that evolving ethnic demographics affect U.S. capital markets.
Keywords: Hispanic culture, local bias, lottery stocks, return comovement, local returns, return momentum.
JEL Classification: G11, G12
Suggested Citation: Suggested Citation