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Do Role Models Affect Risk-Taking Behavior? The Case of Minorities

Yosef Bonaparte, Sarah Khalaf and George Korniotis

No 14264, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We show that social changes, like the success of role models, affects household financial decisions. Specifically, President Obama is a role model for minorities. Minorities historically underinvest in equity, which contributes to the widening racial wealth gap. Obama's election in 2008 is a positive social change for minorities that should encourage investing. Indeed, post-2008 and compared to White Americans, minorities, have a higher propensity to increase risk tolerance and to increase allocations to risky assets and savings, a lower propensity to exit the market, and trade more often. Overall, we show that societal factors affect the racial stock ownership gap.

Keywords: asset allocation; PSID; Savings; SCF; Stock ownership; Trading; wealth gap (search for similar items in EconPapers)
JEL-codes: D14 G11 J15 J16 (search for similar items in EconPapers)
Date: 2019-12
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