Working Paper: CEPR ID: DP14264
Authors: Yosef Bonaparte; Sarah Khalaf; George Korniotis
Abstract: We study the financial behavior of minorities over 2007-09. We find that after 2008 and compared to whites, African Americans and Hispanics have a higher propensity to increase risk tolerance, optimism, and allocations to risky assets and lower probability of exiting the stock market. These findings cannot be explained by changes in wealth or income, and we ascribe them to the positive effects of President Obama who is a role model for minorities. Specifically, we find that the change in behavior by minorities is consistent with minorities updating their beliefs about future economic outcomes.
Keywords: risk tolerance; optimism; stock ownership; asset allocation; wealth gap; SCF; presidential elections
JEL Codes: D14; G11; J15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Obama election (K16) | updates in beliefs about future economic outcomes (D84) |
| Obama election (K16) | priming of positive identity roles (E71) |
| Obama election (K16) | trust in institutions (O43) |
| minority financial behavior (G51) | willingness to invest in risky assets (G11) |
| minorities' beliefs about future economic outcomes (J15) | willingness to invest in risky assets (G11) |
| Obama election (K16) | minority financial behavior (G51) |
| minorities' stock market exit likelihood (J15) | white stock market exit likelihood (G17) |
| entry decisions of African Americans (R23) | entry decisions of whites (J79) |