Prior literature has examined minority stock market participation and found that it increased rapidly throughout the 1990's and into the early 2000's. However, in 2004 after stock prices had suffered decline, Black and Hispanic market participation fell off sharply. This paper uses the NLSY 79 a panel data set to examine whether the diminished likelihood of Black and Hispanic 2004 market participation is due to race or variation in cognitive ability and investor experience. We find that IQ and investor experience subsume all racial effects in the likelihood of 2004 market participation.
AltonjiJ., DoraszelskiU.The role of permanent income and demographics in Black/White differences in wealth.J Hum Resour.2005; 40(1): 1–30.
2.
AltonjiJ., DoraszelskiU.“The Role of Permanent Income and Demographics in Black/White Differences in Wealth.” Working paper no. 8473.Cambridge, Mass: NBER; 2001.
3.
AltonjiJ., DoraszelskiU., and SegalL.“Black/White differences in wealth”, Economic Perspective (Federal Reserve Bank of Chicago), 2000: 38–50.
4.
Ariel-Schwab, (2007) The Ariel-Schwab Black Paper; A Decade of Research on African American Wealth Building and Retirement Planning. October 2007.
5.
BaileyW.B., KumarA., and NgD.Behavioral biases and mutual fund clienteles.AFA2009 San Francisco Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1108163 2009.
6.
BarberB.M., OdeanT.Trading is hazardous to your wealth: The common stock investment performance of individual investors.J Finance.2000; 55(2): 773–806.
7.
BarberB.M., LeeY.T., LiuY.J., OdeanT.Just how much do individual investors lose by trading?Review of Financial Studies.2009; 22(2): 609–32.
8.
BenjaminD.J., BrownS., and ShapiroJ.Who is behavioral? : Cognitive Ability and Anomalous Preferences. Available at SSRN: http://ssrn.com/abstract=675264 2006.
9.
BlanchflowerD.G., LevineP.B., ZimmermanD.J.Discrimination in the small-business credit market.Rev Econ Stat.2003; 85(4): 930–43.
10.
BlauF., GrahamJ.Black-White differences in wealth and asset composition.Q J Econ.1990; 105(2): 321–39.
11.
CharlesK., HurstE.The transition to home ownership and the black-white wealth gap.Rev Econ Stat.2002; 84(2): 281–97.
12.
ChitejiN.S., StaffordF.P.Portfolio choices of parents and their children as young adults: Asset accumulation by African-American Families.Am Econ Rev.1999; 89(2): 377–80.
13.
ChristelisD., JappelliT., and PadulaM.“Cognitive Abilities and Portfolio Choice.” Working paper, September 2008 draft 2008.
14.
ColemanS.Risk tolerance and the investment behavior of black and Hispanic heads of household.Financial Counseling and Planning.2003; 14(2): 43–52.
15.
CornwellE.Y., and CornwellB.Access to expertise as a form of social capital: An examination of race- and class-based disparities in network ties to experts.Sociological Perspectives. Forthcoming 2009.
16.
DharR., and NingZ.Up, close and personal: An individual level analysis of the disposition effect, Management Science Forthcoming 2006.
17.
DietzR.D., HaurinD.R.The social and private micro-level consequences of homeownership.Journal of Urban Economics.2003; 54(3): 401–50.
18.
FengL., SeasholesM.S.Do investor sophistication and trading experience eliminate behavioral biases in financial markets?Review of Finance.2005; 9: 305–51.
19.
FraserS.The bell curve wars Race, intelligence, and the future of America.Harper Collins: Scranton Pa; 1995.
20.
FrederickS.Cognitive reflection and decision making.J Econ Perspect.2005; 19(4): 25–42.
21.
FriesenG.C., SappT.Mutual fund flows and investor returns: An empirical examination of fund investor timing ability.Journal of Banking & Finance.2007; 31(9): 2796–816.
22.
GittlemanM., WolffE.N.Racial Differences in patterns of wealth accumulation.Journal of Human Resources.2004; 4(XXXIX): 193–227.
23.
GoetzmannW.N., and KumarA.Why do individual investors hold underdiversified portfolios?, Working Paper (November), University of Texas at Austin and Yale International Center of Finance2005.
24.
GutterM.S., FontesA.Racial differences in risky asset ownership: A two-stage model of the investment decision making process.Financial Counseling and Planning.2006; 17(2): 64–78.
LongJ.E., and CaudillS.B.Racial differences in home ownership and housing wealth, economic inquiry 1970–1986; 2007. p. 83–100.
36.
MenchikP.L., JianakoplosN.A.Black white wealth inequality: Is inheritance the reason.Econ Inq.1997; 35(2): 428–42.
37.
MontaguA.Race and IQ.New York: Oxford University Press;1999.
38.
MyersS.L., ChanT.Racial discrimination in housing markets: Accounting for credit risk.Soc Sci Q.1995; 76(3): 543–61.
39.
OliverM.L., ShapiroT.M.Black Wealth/White Wealth: a new perspective on racial inequality.New York: Routledge;1997.
40.
ParkerA., FischhoffB.Decision-making competence: External validation through an individual-differences approach.J Behav Decis Mak.2005; 18: 1–27.
41.
PlathD.A., StevensonT.Financial services and the African American market: What every financial planner should know.Financial Services Review.2000; 94: 343–59.
42.
SmithJ.D.“White Wealth and Black People: The Distribution of Wealth in Washington, D.C. in 1967,” in The Personal Distribution of Income and Wealth, edited by SmithJames. D.New York: Columbia University Press, 1975 p. 321–63.
43.
StevensonT.H., PlathD.A.Marketing financial services to the African American consumer: A comparative analyss of investment portfolio consumption.Calif Manag Rev.2002; 11(4): 39–64.
44.
SundénA.E., and SuretteB.J.Gender Differences in the Allocation of Assets in Retirement Savings Plans The American Economic Review, Vol.88, No. 2, Papers and Proceedings of the Hundred and Tenth Annual Meeting of the American Economic Association (May, 1998), 1998 p. 207–211
45.
TerrellH.S.“Wealth Accumulation of Black and White Families: The Empirical Evidence.”Journal of Finance, May 1971, 363–77.
46.
Vissing-JorgensenA.Perspectives on behavioral finance: does “irrationality” disappear with wealth? Evidence from expectations and actions. In: GertlerM., RogoffK., editors. NBER Macroeconomics annual.Cambridge MA: MIT Press; 2003.
WhetzelD., McDanielM.Prediction of national wealth.Intelligence.2006; 34(5): 44–458.
49.
WilmothJ., KosoG.Does marital history matter? Marital status and wealth outcomes among preretirement adults.Journal of Marriage and the Family.2002; 64(1): 254–68.
50.
WolffE.N.Recent Trends in the Size Distribution of Household Wealth.J Econ Perspect.1998; 12(3): 131–50.
51.
YaoR., GutterM.S., HannaS.D.The financial risk tolerance of Blacks, Hispanics, and Whites.Financial Counseling and Planning.2005; 16(1): 51–62.
52.
ZagorskyJ.L.Do you have to be smart to be rich? The impact of IQ on wealth, income, and financial distress.Intelligence.2007. doi: 10.1016/j.intell.2007.02.003.
53.
ZagorskyJ.L.Marriage and divorce's impact on wealth.J Sociol.2005; 41(4): 406–24. doi: 10.1177/1440783305058478.
54.
ZagorskyJ.L.Young baby boomers’ wealth.Review of Income and Wealth.1999; 45: 135–56.
