Population Diversity and Financial Risk-Taking
79 Pages Posted: 7 Jul 2020 Last revised: 6 Mar 2023
Date Written: July 6, 2020
We hypothesize that financial risk-taking originates in preindustrial interpersonal population diversity. We use data on immigrants residing in the United States and show that controlling for all known determinants of portfolio decisions and more than 100 control variables, diversity in the country of immigrants’ origin positively affects stock market participation and the level of risky asset holdings. Our results remain robust when instrumenting diversity with plant variety. We also identify the channels through which the effect of diversity operates (mostly individualism and human capital), but also conclude that diversity exerts an independent effect.
Keywords: Stock market participation, Equity share, SIPP, Immigrants, Individualism, Scientific knowledge, Financial endowment.
JEL Classification: G41, O16, Z13
Suggested Citation: Suggested Citation