The Racial Gap in Stock Market Participation

[OfTheCross]

The Racial Gap in Stock Market Participation

White households have a much higher stock market participation rate than Black households, which may help explain the large racial wealth gap.

www.stlouisfed.org

Stock Market Participation Rates by Race​

Chien and Bennett used data from the 2018 Survey of Income and Program Participation (SIPP). Their definition of stock market participation was based on whether the value of a household’s stocks and mutual funds was greater than zero at any point in 2017 (the survey’s reference year), they explained.

Chien and Bennett found a sizable difference between the two groups’ stock market participation rates. In particular, they noted that:

• 24% of white households reported owning stock or mutual funds.
• Less than 8% of Black households reported owning stock or mutual funds.

Stock Market Participation Rates by Race and Income​

Since the racial income gap may be driving the difference, the authors also examined stock market participation rates after controlling for household income level. They found that the large gap in participation rates remained under this scenario. (This can be seen in the figure below, which is from the Economic Synopses essay.)

“The gap remains large for each group and even appears to widen for higher-income brackets, indicating that household income level does not account entirely for the differences in participation rates between Black and White households,” they wrote.

Chien and Bennett then looked at how much the stock market participation rate gap might close if the income distribution of Black households matched the income distribution of white households. Under this thought experiment, they found that the stock market participation rate among Black households would increase from 8% to about 11.4%—still well below the 24% rate among white households.

“Further attention should be paid to understanding the underlying causes of the difference in stock market participation rates between White and Black households as well as other contributing factors to the racial wealth gap, such as differences in retirement saving,” the authors wrote.

 

[Serious]

How much disposable income do blacks typically have. Even if they make great money, a lot black people still directly or indirectly support other family members whom may not be doing as well.

Just like the common phrase in Atlanta “Put me on” is real.

 

[bnew]

so what are black people making $200K+ a year investing in?

 

[dora_da_destroyer]

so what are black people making $200K+ a year investing in?

Bitcoin

 

[OfTheCross]

so what are black people making $200K+ a year investing in?

nothing...like @Serious said, they paying bills and other shyt. Mis-spending is also a possibility.

 

[OperationNumbNutts]

How much disposable income do blacks typically have. Even if they make great money, a lot black people still directly or indirectly support other family members whom may not be doing as well.

Just like the common phrase in Atlanta “Put me on” is real.

Sorry dude but that disposable income argument is old. You have folks posting vacation pics on FB, bunch every other week, and the list goes on. Exposure may be the mail culprit though.

 

[bnew]

Sorry dude but that disposable income argument is old. You have folks posting vacation pics on FB, bunch every other week, and the list goes on. Exposure may be the mail culprit though.

aren't a lot those vacations financed through credit cards & "buy now, pay later" schemes?

 

[OfTheCross]

Sorry dude but that disposable income argument is old. You have folks posting vacation pics on FB, bunch every other week, and the list goes on. Exposure may be the mail culprit though.

man. that's not normal. I know more black ppl that never been on vacation, period, than have been.

 

[acri1]

nothing...like @Serious said, they paying bills and other shyt. Mis-spending is also a possibility.

Or just stashing it in a savings account.

Investing in stocks just isn't something most black people learn about from their family. The average person doesn't even know where to begin with stocks.

 

[ORDER_66]

man. that's not normal. I know more black ppl that never been on vacation, period, than have been.

I've never been on a real vacation myself like i worked hard all my life and never went to an exotic place and relaxed...

 

[ORDER_66]

Or just stashing it in a savings account.

Investing in stocks just isn't something most black people learn about from their family. The average person doesn't even know where to begin with stocks.

Facts... plus younger black folks fukk with crypto heavy not and or not stocks...

 

[DEAD7]

How are asians and latinx folks doing?

 

[OperationNumbNutts]

aren't a lot those vacations financed through credit cards & "buy now, pay later" schemes?

Schemes....well I won't entertain that. As far a credit cards I could agree but it is being paid back with cash.

 

[OperationNumbNutts]

man. that's not normal. I know more black ppl that never been on vacation, period, than have been.

Fair enough. Still it really boils down to perception which can lead to lack of action. This isn't the 80s where you need a broker and a starting account of something like $10k. I do think the lack of education and awareness is the biggest problem.

 

[NZA]

my 2 cents...

you need serious capital to have enough shares to make investing pay off in a reasonable timeframe (shorter than retirement)
you also need some degree of teaching and practice - the teaching is not common among blackfolk and practice involves risking money that is more precious with blacks than it is with whites.

blacks with money tend to be solving family socioeconomic problems with the money or investing in something tangible like real estate or small businesses (that could go back to the fear of risk)

younger blacks may be going into crypto but i doubt most would be considered high income. probably mostly young people with all the usual millennial/zoomer economic problems and looking at crypto as the only realistic shot at a middle class life. it allows for fractional purchases and there is no real fundamental teaching that needs to be done like securities investing - especially as the usual black investment - real estate - has become absurdly priced while much of the youth workforce is in amazon fulfillment centers and doordash.