Foreign Talent and Hedge Funds
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.
Foreign labor, H-1B, Visa, Systematic, Quantitative, Race, Ethnicity, Diversity, Homophily, STEM, Education
SMU Cox: Finance (Topic)