Does Diversity Lead to Diverse Opinions? Evidence from Languages and Stock Markets
Shanghai Advanced Institute of Finance, Shanghai Jiao Tong University; China Academy of Financial Research (CAFR)
Harrison G. Hong
Princeton University - Department of Economics; National Bureau of Economic Research (NBER)
Stanford Graduate School of Business
Shanghai Advanced Institute of Finance; Shanghai Jiao Tong University (SJTU); China Academy of Financial Research (CAFR)
December 26, 2013
Rock Center for Corporate Governance at Stanford University Working Paper No. 168
Stanford University Graduate School of Business Research Paper No. 13-16
An oft-cited premise for why diverse societies, be it ethnic, linguistic or religious, can grow faster than homogeneous ones is that they bring about diverse opinions, which foster problem solving and creativity. We provide evidence for this premise using a linguistic measure of diversity across Chinese provinces and stock market measures of diverse opinions. This cross-province variation in linguistic diversity is correlated with the extent of hilly terrain in a province but is uncorrelated with financial development in that province. Households in provinces with more linguistic diversity have more diverse opinions as measured by greater trading of and disagreement on stock message boards about local stocks. Linguistic diversity is also correlated with small private enterprise diversity. An analogous cross-country regression suggests that our conclusion extrapolates beyond China.
Number of Pages in PDF File: 67working papers series
Date posted: January 1, 2014 ; Last revised: February 4, 2014
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