© 2013 Association for Financial Counseling and Planning Education ® . All rights of reproduction in any form reserved. 63 The Impact of Immigrant Status and Racial/Ethnic Group on Differences in Responses to a Risk Aversion Measure Mei-Chi Fang, Sherman D. Hanna, and Swarn Chatterjee Factors related to differences in risk aversion were analyzed with a measure of risk aversion inferred from answers to a hypothetical income gamble question in the U.S. Health and Retirement Study. Cumulative logistic regressions, controlling for income, age, gender, health status, current job status, and home ownership, showed that Blacks were more risk averse than Whites, but Hispanics born in the United States were not different from Whites. U.S. born respondents in an “other” group, largely Asian, were also not different from Whites. Hispanics and those in the other group who were immigrants were more risk averse than Whites. Racial/ethnic differences found in other risk aversion studies may be partly due to differences in immigrant status. Key Words: immigrants, investments, racial/ethnic differences, risk aversion, risk tolerance Introduction In the literature, the vast majority of studies on racial/eth- nic differences indicate that Blacks and Hispanics have lower risk tolerance than Whites (Yao, Gutter, & Hanna, 2005). The inancial market participation of ethnic groups other than non-Hispanic Whites in the United States is rel- atively new (Chiteji & Stafford, 1999). Immigrants tend to be unfamiliar with using inancial markets for asset accumulation. The lack of investment experience may lead them to be cautious when approaching the inancial sys- tems, and therefore risk averse to allocating their savings to investment assets such as stocks or mutual funds (Osili & Paulson, 2008). The Yao et al. (2005) study showed racial/ethnic differ- ences in risk tolerance in the United States by using the Survey of Consumer Finances (SCF) investment risk tol- erance measure, which is the only risk tolerance question used in a nationally representative sample of U.S. house- holds over a long period of time (Yao, Hanna, & Linda- mood, 2004). One alternative measure, a set of experi- mental job-risk questions involving gambles over one’s lifetime income, is employed in the Health and Retirement Study (HRS). The HRS was designed to provide a measure Mei-Chi Fang, Ph.D., Assistant Professor, Department of Business Administration, The Transworld University, No.1221, Zhennan Rd., Douliu City, Yunlin County 640, Taiwan (R.O.C.), 886-5-537-0988 # 8159, fang.70@twu.edu.tw Sherman D. Hanna, Ph.D., Professor, Human Sciences Department, The Ohio State University, 1787 Neil Ave., Columbus, OH 43210, (614) 292-4584, hanna.1@osu.edu Swarn Chatterjee, Ph.D., Associate Professor, Department of Financial Planning, Housing, and Consumer Economics, The University of Georgia, 205 Dawson Hall, Athens, GA 30602, (706) 542-4722, swarn@uga.edu of relative risk aversion (Barsky, Juster, Kimball, & Shap- iro, 1997). Hanna and Lindamood (2004) proposed that the HRS measure is the only measure of risk attitude that is rigorously linked to investment portfolio choices. The current study extends the existing literature on risk tolerance in several different ways. The study ills the existing gap in the literature by examining the racial/ ethnic differences in the HRS risk aversion measure. We further add to the literature by researching the association between being foreign born and risk tolerance using the HRS. Unlike the SCF, the HRS allows for identiication of whether a respondent was born in the United States. Literature Review Normative Analyses of Portfolio Allocations and Risk Aversion Campbell and Viceira (2002) and Viceira (1999) presented rigorous analyses of optimal portfolio allocation and con- cluded that levels of relative risk aversion were related to portfolio allocation. The researchers suggested that inves- tors with levels of relative risk aversion under 2.0 should possess very risky portfolio allocations, while those with higher relative risk aversion should have more conserva-