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Differences in Risk Tolerance and Asset Allocation among White, Black, and Hispanic Households in the United States

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  • Takanori Hisada

Abstract

This study examines differences in risk tolerance and asset allocation among white, black, and Hispanic households in the United States. Regressions are run using a sample chosen by propensity score matching because there are substantial differences in the distributions of covariates among race and ethnicity. This study finds that white, black, and Hispanic households are more likely to have similar risk tolerances. In addition, this study finds that all three households are more likely to have similar asset allocations. Simultaneously, in practice, there is wealth inequality between whites and nonwhites. These results imply that differences among race and ethnicity do not affect risk tolerance and asset allocation, and therefore, wealth inequality between whites and nonwhites is not attributed to asset allocation.

Suggested Citation

  • Takanori Hisada, 2018. "Differences in Risk Tolerance and Asset Allocation among White, Black, and Hispanic Households in the United States," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(1), pages 93-109, January.
    • Handle: RePEc:ibn:ijefaa:v:10:y:2018:i:1:p:93-109
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    References listed on IDEAS

    as
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    3. Gutter, Michael S. & Fox, Jonathan J. & Montalto, Catherine P., 1999. "Racial differences in investor decision making," Financial Services Review, Elsevier, vol. 8(3), pages 149-162.
    4. Badu, Yaw A. & Daniels, Kenneth N. & Salandro, Daniel P., 1999. "An empirical analysis of differences in Black and White asset and liability combinations," Financial Services Review, Elsevier, vol. 8(3), pages 129-147.
    5. Rajeev H. Dehejia & Sadek Wahba, 2002. "Propensity Score-Matching Methods For Nonexperimental Causal Studies," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 151-161, February.
    6. Barsky R. & Bound J. & Charles K.K. & Lupton J.P., 2002. "Accounting for the Black-White Wealth Gap: A Nonparametric Approach," Journal of the American Statistical Association, American Statistical Association, vol. 97, pages 663-673, September.
    7. Abadie, Alberto & Imbens, Guido W., 2011. "Bias-Corrected Matching Estimators for Average Treatment Effects," Journal of Business & Economic Statistics, American Statistical Association, vol. 29(1), pages 1-11.
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    11. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
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    More about this item

    Keywords

    risk tolerance; asset allocation; race; ethnicity; propensity score match;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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