People who are more likely to experience social discrimination at some point in their lives are less likely to participate in the stock market and will allocate less of their wealth to equities, according to new research from the University of Miami School of Business Administration.
The study found that African Americans, women and LGBTQ individuals who were discriminated against were likely to overestimate their exposure to risks, such as income risk, which induced them to take on less financial risk.
These results indicate that social factors such as discrimination can influence the financial risk-taking behavior of U.S. households.
The paper says discrimination of minorities is an enduring social problem of modern societies. It argues that the internal consequences of discrimination on preferences can be as damaging as the direct effects of discrimination, with a lasting effect on how individuals perceive risk.