Foreign Talent and Hedge Funds

54 Pages Posted: 9 Feb 2022 Last revised: 22 Mar 2022

See all articles by Jun Chen

Jun Chen

Renmin University of China - School of Business

Shenje Hshieh

City University of Hong Kong

Melvyn Teo

Singapore Management University - Lee Kong Chian School of Business

Feng Zhang

Southern Methodist University (SMU) - Finance Department

Date Written: February 4, 2022

Abstract

We examine the value of skilled foreign labor for hedge funds by leveraging on two natural experiments. We find that hedge funds that secure more H-1B visas in random lotteries deliver higher alphas, Sharpe ratios, and information ratios. Moreover, an unexpected reduction in the H-1B quota undermined the performance of hedge funds that were dependent on H-1B workers. The superior performance of funds with high H-1B allocations can be attributed to highly-educated STEM majors operating systematic strategies. Notwithstanding the valuable skills that foreign workers possess, racial and ethnic homophily induces some fund managers to eschew foreign labor.

Keywords: Foreign labor, H-1B, Visa, Systematic, Quantitative, Race, Ethnicity, Diversity, Homophily, STEM, Education

JEL Classification: G23, J15, J24, J61

Suggested Citation

Chen, Jun and Hshieh, Shenje and Teo, Melvyn and Zhang, Feng, Foreign Talent and Hedge Funds (February 4, 2022). SMU Cox School of Business Research Paper No. 22-05, Available at SSRN: https://ssrn.com/abstract=4025639 or http://dx.doi.org/10.2139/ssrn.4025639

Jun Chen

Renmin University of China - School of Business ( email )

59 Zhongguancun Street, Haidian District
Beijing, 100872
China

Shenje Hshieh

City University of Hong Kong ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

Melvyn Teo (Contact Author)

Singapore Management University - Lee Kong Chian School of Business ( email )

50 Stamford Road
Singapore, 178899
Singapore
+65 6828 0735 (Phone)
+65 6822 0777 (Fax)

Feng Zhang

Southern Methodist University (SMU) - Finance Department ( email )

SMU Cox School of Business
6212 Bishop Blvd
Dallas, TX 75275
United States

HOME PAGE: http://https://sites.google.com/view/fengzhangfin

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