July 07, 2023
Meghan O’Toole
Dimitra Papadovasilaki publishes study examining racial wealth inequity
Associate Professor of Finance Dimitra Papadovasilaki recently had a study, “Portfolio Decisions and Perceived Racial Discrimination,” published in the Journal of Behavioral and Experimental Economics.
The study, co-authored by Alessandro Bucciol, Professor of Econometrics at the University of Verona, examines the relationship between individual portfolio decisions and perceived discrimination, with a focus on racial discrimination. The article abstract states, “We show that sensing racial discrimination has a bigger association with shaping portfolio decisions than any other type of discrimination. Perceived racial discrimination is correlated not only with the choice to opt-in risky financial assets, but also the amount of assets held.”
Papadovasilaki identified a need for the study when examining racial wealth inequality in the US. According to the Federal Reserve Bank of St. Louis, as of 2019 the median wealth of the typical white family was $184,000 compared to $38,000 for the typical Hispanic family and $23,000 for the typical Black family.
“While previous research has examined the impact of racial discrimination on wealth through its influence on health, education, socioeconomic status, and social networks, this study represents the first attempt to explore the connection between financial risk-taking and racial discrimination,” Papadovasilaki said. “Although we should not expect differences in wealth accumulation purely based on race, data consistently show that race has a significant explanatory power on wealth, which underscores the effects of systemic racial discrimination that has persisted in the US since its inception.”
Adriana Jovsic ’22, who is currently a financial analyst at Goldman Sachs, and economics major Kalwa Kafuli ’24 assisted with the research. Papadovasilaki also extended thanks to K. & H. Montgomery Associate Professor of History and African American Studies Courtney Joseph for her professional insight. Papadovasilaki is also grateful to her colleagues in the economics, business, and finance department for providing comments and edits that helped improve the outcome of the manuscript.
“Eliminating racial discrimination in all its forms should be a priority in policymaking,” Papadovasilaki said. “It is deeply regrettable that affirmative action programs aimed at combating racial discrimination, such as those used in college admissions, were recently invalidated by the Supreme Court. This ruling is likely to have a detrimental effect on achieving equal representation, particularly within professions that are predominantly dominated by white individuals. It is crucial that we recognize the significance of promoting comprehensive anti-discrimination laws, equity, and inclusion in all aspects of society to effectively reduce racial wealth inequality.”