Racial/Ethnic Disparities in High Return Investment Ownership: A Heckman Selection Model
7 Pages Posted: 17 Feb 2018
Date Written: February 7, 2018
This study investigates racial/ethnic differences in high return investment ownership in the U.S. Households with low levels of financial assets might not be able to meaningfully make investment choices, so a Heckman two-stage selection model was used to separate minimum asset level status from the allocation decision, specifically in whether households owned at least one high return investment. We found households with White respondents were more likely than households with Black and Hispanic respondents to have adequate financial assets for investment. Conditional on having adequate financial assets, and controlling for household characteristics and financial literacy, White households were more likely to own high return investments than Black, Hispanic and Asian/other households. Policies to nudge households to invest some wealth in high return investment assets would benefit minority households.
Keywords: Heckman selection model, investment choices, portfolio allocation, racial/ethnic differences, Survey of Consumer Finances
JEL Classification: D14, D92, J15
Suggested Citation: Suggested Citation