Strength in Differences: How Racial Integration Shapes Household Financial Decision-Making

54 Pages Posted: 28 Sep 2021 Last revised: 5 Nov 2021

See all articles by Melina Murren Vosse

Melina Murren Vosse

University of Miami-Miami Herbert Business School

Date Written: September 15, 2021

Abstract

Using proprietary geocoded data from the Panel Study of Income Dynamics, I examine whether local racial integration influences financial decision-making. I find that individuals residing in racially integrated communities are more likely to invest in public equity markets after accounting for individual and county-level differences. Exploiting within-individual variation from relocation as well as using Great Migration population shocks as an instrument, I demonstrate that integration has a causal effect on participation. Evidence suggests that racial integration improves local information quality, lowering informational barriers to participation. Moreover, this informational advantage enables integrated investors to achieve superior risk-adjusted performance on their local portfolios.

Keywords: Household Finance, Information Environment, Social Structure, Behavioral Finance

JEL Classification: D14, D63, D83, D85, D91, G41, G51

Suggested Citation

Murren Vosse, Melina, Strength in Differences: How Racial Integration Shapes Household Financial Decision-Making (September 15, 2021). University of Miami Business School Research Paper No. 3931460, Available at SSRN: https://ssrn.com/abstract=3931460 or http://dx.doi.org/10.2139/ssrn.3931460

Melina Murren Vosse (Contact Author)

University of Miami-Miami Herbert Business School ( email )

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

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