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Cultural Difference: Investment Attitudes and Behaviors of High Income Americans

Cultural Difference: Investment Attitudes and Behaviors of High Income Americans. Tahira K. Hira – Iowa State University 515.294.2042 tkhira@iastate.edu Caezilia Loibl – Ohio State University Tom Schenk Jr. – Iowa State University

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Cultural Difference: Investment Attitudes and Behaviors of High Income Americans

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  1. Cultural Difference:Investment Attitudes and Behaviors of High Income Americans Tahira K. Hira – Iowa State University 515.294.2042 tkhira@iastate.edu Caezilia Loibl – Ohio State University Tom Schenk Jr. – Iowa State University *This work was made possible by a generous grant from FINRA Education Foundation.

  2. Introduction • What is the next generation of investors in the United States going to look like • Will the high income diverse investors perceive and behave differently • When investing and • When planning for retirement • What will be the effects of these differences Tahira K. Hira

  3. Objectives • Survey • Focus on high income investors • Includes Whites, Blacks, Hispanics, and Asians • Research Topics • Risk tolerance level • Investor confidence • Retirement confidence Tahira K. Hira

  4. Procedures • National Random Sample • Sample 4,1410 • Targeted geographical areas wit Av. households incomes of $100,000 and • high concentration of minorities - 30% • Data Collection • 911 households agreed to participate • CCSM conducted phone interviews between 0/05 and 2/06 • Average phone interview - 22 minutes • Response rate of 22% Tahira K. Hira

  5. Descriptive Statistics Tahira K. Hira

  6. Risk Tolerance: Measure “Are you willing to take --- 1 = substantial financial risks to earn substantial returns 2 = above average risks for above average returns 3 = average risks for average returns 4 = below average risks for below average returns 5 = or no risk at all?” Tahira K. Hira

  7. Risk Tolerance: Results *Chi-square statistic is significant at the 10% level. Tahira K. Hira

  8. Risk Tolerance: Regression Tahira K. Hira

  9. Risk Tolerance: Regression Tahira K. Hira

  10. Risk Tolerance: Regression Tahira K. Hira

  11. Risk Tolerance: Regression Tahira K. Hira

  12. Predictors of Risk Tolerance: • Demographics • Age (negative) • Race (white) • Income (positive) • Education (positive) • Follow consistent investment strategy (negative) Tahira K. Hira

  13. Investor Confidence-Measure Tell me “whether you strongly disagree, disagree, agree, or strongly agree with each of statement” • I am confident about my ability to invest • I worry about the outcome of my investments • I am knowledgeable about investing Tahira K. Hira

  14. Investor Confidence: Results Tahira K. Hira

  15. Investor Confidence: Males Tahira K. Hira

  16. Retirement Confidence- Measure “Tell me whether you strongly disagree, disagree, agree, or strongly agree with each of the following statements” • I maximize contributions to my retirement account • I have a clear idea of my financial needs during retirement • I am confident I will be financially secure Tahira K. Hira

  17. Retirement Confidence: Results Tahira K. Hira

  18. Summary: Risk Tolerance • Differences • Minorities (including Asians) tend to be less risk tolerant than whites • Marital status, household size, and gender did not influence risk thresholds • Similarities • Higher income increased risk tolerance. • Age decreased risk tolerance Tahira K. Hira

  19. Summary: Investor Confidence • New Findings • Minorities are generally at least as confident as whites …especially Asians • Similarities • Men claim to be …more knowledgeable about investing …confident …but worry more often (for minorities) • Differences • Gender effects tend to be strongest for whites Tahira K. Hira

  20. Summary: Retirement Confidence • New Findings • Asians are more likely to maximize contributions to their retirement accounts • Differences • Minorities do not exhibit lower retirement confidence levels • Similarities • Overall levels of retirement confidence are high among all ethnic and racial groups Tahira K. Hira

  21. Implications • Minorities being less risk tolerant may imply greater wealth inequalities (in the long run) • “ we should help target groups who are under investing” • Minority females are less confident investors • “we should target education programs to women” • Favorable outlook for the well-being during retirement for high net-worth minorities and whites Tahira K. Hira

  22. Questions and Answers Dr. Tahira K. Hira Iowa State University 515.294.2042 tkhira@iastate.edu www.eng.iastate.edu/tkhira This work was made possible by a generous grant from FINRA Education Foundation Tahira K. Hira

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