Childhood Socioeconomic Status and Adults' Investment Choices

Authors
Guiyang Xiong, Associate Professor of Marketing, Whitman School of Management, Syracuse University
Alison Xu, Associate Professor of Marketing and Mary & Jim Lawrence Fellow, Carlson School of Management, University of Minnesota
Xiaobo Lin, Ph.D. student, Whitman School of Management, Syracuse University
Keith Wilcox, Professor of Marketing and Macy's Foundation Professor, Mayes Business School, Texas A&M University


Essence (findings or implications) of your paper
When facing adversities, childhood socioeconomic status influences adults' choices of financial investment options

Research Questions
What are the effects of childhood and current socioeconomic status on adults' preferential biases over highly risky investment options? Under what conditions are such effects mitigated or amplified?

What We Know.
Black and Hispanic individuals constitute an unproportionally large percentage of investors in the highly volatile cryptocurrency market. According to a recent survey, 42% of cryptocurrency investors identify as nonwhite, among which 23% are Hispanics (vs. 17% of the general population and 10% of all U.S. investors). Echoing such statistics, news reports also state that “black investors seemingly prefer cryptocurrencies” (Forbes 2021) and express concerns over “the black investors who were burned by Bitcoin” (The Atlantic 2022). In sharp contrast, the literature has documented under-saving and low involvement in traditional investment options among the historically disadvantaged communities.

Originality/Value - Novel Findings
Biased choices of certain investment options can worsen / widen racial wealth gap. Our findings will provide new ideas to tackle such preferential biases, e.g., how to design proper public policy interventions, and how companies can develop more socially responsible promotion strategies.

Abstract
Our research aims to systematically investigate the antecedents to biased investment preferences for highly risky options. We compare the effects of childhood socioeconomic status (SES) and current SES on adults’ risk-taking tendency when choosing investment alternatives. We hypothesize that, while low current SES has a direct impact on choosing risky investment option, whereas low childhood SES only shows an impact when people face financial adversities. In addition, the effect of childhood SES is conditional on other individual-level characteristics such as aspiration, education level, and financial knowledge to influence investment preferences.