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Associates Fellow in finance explores race, gender and neurodivergence and financial outcomes

Asper associate professor Chi Liao on the puzzles traditional finance can’t resolve

April 17, 2024 — 


How does ADHD impact financial wellbeing and decision-making?

In what ways do gender roles at home predict children’s future investments?

What effect does race-based trauma have on the financial outcomes of Black individuals and communities?

Asper associate professor and The Associates Fellow in Finance, Chi Liao is an expert in behavioural finance, engaging with datasets and psychology, sociology and other social sciences to tackle these questions. She seeks to understand how broader social phenomena affect individual behaviours in financial decision-making and ultimately financial outcomes.

The Associates Fellowship program supports and highlights innovative, impactful work while providing opportunities for Asper researchers to present their findings to the Manitoba business community through the Emerging Topics Speaker Series. Liao presented her work on ADHD, finance and entrepreneurship to members of the Manitoba business and academic community earlier this year.

As she explains, her research supplements what traditional finance might tell us about investing and financial decision making.

“Traditional finance is built on assumptions of ‘rationality,’ meaning that our preferences don’t change over time, that we only care about ourselves, that we only derive utility from wealth, and so on. These assumptions lead to theories predicting, for instance, that everyone should have some of their wealth invested in the stock market,” she explains.

Liao points out that this prediction is far from the truth (in 2005, Statistics Canada reported that Canadians families’ assets comprised only 22.2% stocks and mutual funds/investment funds/income trusts).

“Given this puzzle that traditional finance can’t resolve, a subset of my research investigates the reasons behind low stock market participation despite its importance for wealth accumulation.”

Liao brings this insight into traditional and behavioural finance to the classroom, teaching core courses in both the undergraduate finance major and the Asper Master of Finance program, a CFA Institute University Affiliation Program that prepares students for their CFA designation exams while connecting them with innovative researchers like Liao.

ADHD and financial outcomes

Liao works with secondary data to address compelling gaps in the literature around puzzles like these. In her pursuit of strong data, she finds herself tracing longer histories of neurodivergence and financial decision making. Her work in ADHD and financial outcomes, for instance, draws from data that spans childhood and young adulthood (early twenties), whereas a new project related to ADHD and retirement uses data focused on older adults and retirees. While the range is an important component of credible quantitative research, she points out another implication.

“It goes to show how strongly the effects of ADHD can persist over time.”

Race, trauma and financial decision making

Likewise, as part of her SSHRC-funded work on race and financial decision making, Liao and her coauthors look for links between exposure to race-based trauma and stock market participation, home ownership, retirement savings and wealth accumulation.

In forthcoming work titled “Race, Police Violence, and Financial Decision-Making,” Liao and co-authors Vicki Bogan, Lisa Kramer and Alexandra Niessen-Ruenzi find that African Americans living near a police-involved fatality of another African American experience decreases in home ownership, home equity and defined contribution pension participation compared to non-African Americans. They plan to broaden the focus of this research to explore how race-based historical trauma can be passed down through generations to affect present-day financial decisions and outcomes.

Finding better questions in the data

A quantitative researcher, Liao takes an observation, a gap in the literature—at times a personal connection or an instinct—and works to find reliable data that quantifies behaviour, facilitates causal inference and ultimately offers a clearer understanding of behaviour.

Her research aims to understand the way our humanity and history influence our financial behaviour, staying attuned to systems of power and barriers to success that might exacerbate our inability to live up to traditional finance’s (admittedly unrealistic) expectations for us.

In compiling and analyzing data on financial management among people with ADHD and investigating credible explanations for race- or gender-based financial inequality, she lays groundwork for researchers and practitioners to continue asking better questions.

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