Immigrants in Finance

Authors

Jun Chen, Renmin University of China - School of BusinessFollow
Shenje Hshieh, City University of Hong KongFollow
Melvyn Teo, Singapore Management University - Lee Kong Chian School of BusinessFollow
Feng Zhang, Southern Methodist University (SMU) - Finance DepartmentFollow

Publication Date

2-4-2022

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.

Document Type

Article

Keywords

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

Disciplines

Finance

DOI

10.2139/ssrn.4025639

Source

SMU Cox: Finance (Topic)

Language

English