Immigrants in Finance

64 Pages Posted: 9 Feb 2022 Last revised: 26 May 2023

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 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

Suggested Citation

Chen, Jun and Hshieh, Shenje and Teo, Melvyn and Zhang, Feng, Immigrants in Finance (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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