Special Topics: Finance and Race
Paper Session
Saturday, Jan. 6, 2024 2:30 PM - 4:30 PM (CST)
- Chair: Rohan Williamson, Georgetown University
Racial Integration and Active Investing
Abstract
This paper studies how racial residential integration (RRI) influences information diffusion in the stock market. We find that firms headquartered in states with high RRI tend to have lower information asymmetry, as reflected in lower analyst earnings forecast dispersion and a narrower adverse selection component of the bid-ask spread. Their stock prices tend to be more informative, comoving more strongly with fundamentals. We also find that active mutual fund managers exhibit stronger abilities to pick local stocks in states with lower RRI, which points to a neglected channel through which active investing improves firms’ information environment.Who Do You Vote For? Same-Race Voting Preferences in Director Elections
Abstract
This paper examines racial preferences of shareholders in the context of corporate director elections. We document a higher propensity of mutual fund managers to vote for director nominees who match their racial or ethnic identity. This same-race preferential voting pattern is more prevalent in elections involving nominees receiving negative recommendations from the dominant proxy advisor ISS. We investigate various potential channels —statistical discrimination, value maximization, conflicts of interest, social networks, and taste-based biases— using high-dimensional fixed effect models along with heterogeneity tests. Additional evidence indicates that same-race preferential voting has important consequences for director candidates' election and career outcomes.Racial Segmentation in the U.S. Housing Market
Abstract
This paper studies racial segmentation in the US housing market since 1960. I document large differences in housing outcomes for Black and White households. In 1960, Black households on average are 20 percentage points less likely to own a house (relative to White households with the same income); if they owned, their house values are lower by the equivalent of almost one year of annual income; and even when renting they spend less by the equivalent of one month of rental expenditures. By 2019, the rent and price gaps have declined by about half, whereas the gap in ownership rates has not changed. To interpret these facts, I use a dynamic housing assignment model with a choice to buy or rent housing. I estimate the degree of market segmentation by inferring differences in the quality of housing available to Black and White households, and the resulting differences in rents, prices, and the cost of owning a home. The model infers that Black households pay higher quality-adjusted rents and prices, especially at higher qualities, and thus sort into lower quality homes. In terms of lifetime consumption-equivalent welfare, relative to an integrated market, the average Black household is five percent worse off in 1960 and remains one percent worse off in 2019.Discussant(s)
Erik Mayer
,
University of Wisconsin-Madison
Leonard Kostovetsky
,
CUNY-Baruch College
Laura Field
,
University of Delaware
Troup Howard
,
University of Utah
JEL Classifications
- G0 - General