Do Role Models Affect Risk-Taking Behavior? The Case of Minorities
35 Pages Posted: 5 Aug 2017 Last revised: 18 Feb 2020
Date Written: February 16, 2020
We show that social changes, like the success of role models, affects household financial decisions. Specifically, minorities underinvest in equity, which contributes to the widening racial wealth gap. But the election of President Obama in 2008, who is a role model from minorities, is a positive social change that should encourage investing. Indeed, post-2008 and compared to White Americans, minorities, trade more often, have a higher propensity to increase risk tolerance as well as allocations to risky assets and savings, and a lower propensity to exit the market. Overall, we show that societal factors affect the racial stock ownership gap.
Keywords: Asset allocation, stock ownership, savings, trading, wealth gap, SCF, PSID
JEL Classification: D14, G11, J15, J16
Suggested Citation: Suggested Citation