Immigrants in Finance

Abstract

We examine the value of skilled immigrants in finance by exploiting two natural experiments. We find that hedge fund management companies 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 visa allocations can be attributed to highly-educated, well-paid, and motivated H-1B workers with quantitative skills. H-1B workers add value by helping hedge funds overcome capacity constraints, arbitrage prominent stock anomalies, and develop distinctive investment strategies.

Keywords: Foreign labor, H-1B, Visa, Systematic, Quantitative, STEM, Education, Anomalies, Capacity Constraints, Race

JEL Classification: G23, J15, J24, J61