Racial/Ethnic Differences in High Return Investment Ownership

 

Hanna, S. D., Wang, C. & Yuh, Y. (2010). Racial/ethnic differences in high return investment ownership: A decomposition analysis. Journal of Financial Counseling and Planning Education, 21 (2), pp. 44-59.

Brief Description:  Research on ownership of high risk/high return assets shows that Black and Hispanic households are much less likely to own them than are White households, even after education is taken into account. This study uses a decomposition strategy to examine how minority households would invest if they had similar demographic and economics characteristics to those of Whites. Results indicate that virtually all of the difference between Black and White households and about 90 percent of the difference between Hispanic and White households in ownership of high return investments can be explained by these household characteristics.

Implications:  Improving household economic characteristics of minority households will do much to increase their likelihood of investing in high return investments. However, risk tolerance also plays a role in saving and investment decisions. Education aimed at increasing the investment risk tolerance of minority households could also lead to increased ownership of investments that have higher risks and returns.