The True Colors of Money: Racial Diversity and Asset Management

55 Pages Posted: 2 Dec 2021 Last revised: 1 Feb 2022

See all articles by Lina Han

Lina Han

Washington University in St. Louis - John M. Olin Business School

Xing Huang

Washington University in St. Louis - Olin Business School

Ohad Kadan

Washington University in St. Louis - John M. Olin Business School

Jimmy Wu

Washington University in St. Louis - John M. Olin Business School

Date Written: November 18, 2021

Abstract

We study the role of race and ethnicity in the investment decisions of mutual fund managers and investors. Funds managed by white-dominant teams allocate larger portfolio weights to firms led by white CEOs compared to funds managed by minority-dominant teams. Nevertheless, white-dominant fund management teams do not deliver superior performance on held firms led by white CEOs, suggesting no race-related informational advantage. Considering flow-performance sensitivity, funds managed by minority-dominant teams are equally penalized for poor performance but not rewarded as much for superior performance compared to white-dominant funds. Our results uncover differential treatment of minority-led funds and firms by investors.

Keywords: Racial/Ethnic Diversity, Mutual Funds, Social Identity Theory, In-group Bias, Flow-performance Sensitivity

JEL Classification: G02, G11, G23, J15, Z10

Suggested Citation

Han, Lina and Huang, Xing and Kadan, Ohad and Wu, Jimmy, The True Colors of Money: Racial Diversity and Asset Management (November 18, 2021). Available at SSRN: https://ssrn.com/abstract=3966470 or http://dx.doi.org/10.2139/ssrn.3966470

Lina Han

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1208
Saint Louis, MO MO 63130-4899
United States

Xing Huang (Contact Author)

Washington University in St. Louis - Olin Business School ( email )

Simon Hall 211
Washington University in St. Louis
St. Louis, MO 63130
United States

Ohad Kadan

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

Jimmy Wu

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

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