Industry Clusters and the Geography of Portfolio Choice

54 Pages Posted: 6 Nov 2019 Last revised: 6 Oct 2021

See all articles by Jawad M. Addoum

Jawad M. Addoum

Cornell SC Johnson College of Business

Stefanos Delikouras

University of Miami - Department of Finance

Da Ke

University of South Carolina - Department of Finance

George M. Korniotis

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

Date Written: October 5, 2021

Abstract

Using detailed data on U.S. households' locations, employment, and financial portfolios, we document that individuals employed in locally clustered industries are more likely to invest in risky assets. This pattern is strongest among individuals with high labor income, employed in skilled occupations, and with strong cognitive skills. Our overall evidence suggests the relation between industry clusters and investment decisions is best explained by clusters enhancing human capital among local industry workers, in turn amplifying their effective risk tolerance. Our findings highlight the important role of local labor market composition in generating household portfolio patterns within and across geographies.

Keywords: local agglomeration, household portfolio choice, human capital

JEL Classification: G11, J24, R23

Suggested Citation

Addoum, Jawad M. and Delikouras, Stefanos and Ke, Da and Korniotis, George M., Industry Clusters and the Geography of Portfolio Choice (October 5, 2021). 9th Miami Behavioral Finance Conference 2018, University of Miami Business School Research Paper No. 2909168, Available at SSRN: https://ssrn.com/abstract=2909168 or http://dx.doi.org/10.2139/ssrn.2909168

Jawad M. Addoum

Cornell SC Johnson College of Business ( email )

Ithaca, NY 14850
United States

Stefanos Delikouras

University of Miami - Department of Finance ( email )

P.O. Box 248094
Coral Gables, FL 33124-6552
United States

Da Ke

University of South Carolina - Department of Finance ( email )

1014 Greene Street
Columbia, SC 29208
United States

HOME PAGE: http://www.dakefinance.com

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

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