Abstract
This paper compares the financial market participation of immigrants and native-born Americans. Financial asset ownership is examined after controlling for the immigrants’ country of origin using a nationally representative National Longitudinal Survey (NLSY79) data set. The determinants of preference for financial asset ownership and the amount of financial equity held by households are estimated using a two-stage procedure. The results indicate that immigrants are less likely to own financial assets and more likely to have lower financial equity than native-born residents. Income uncertainty and risk tolerance of immigrants are associated with their preference for financial investments. Immigrants’ years of residence in the United States also increase their financial asset ownership. A discussion of the implications of these findings for policy makers, immigration researchers, and scholars of household savings behavior is also included.
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Notes
Further development of the one-period mean-variance model is outlined in Tobin (1958). This simple model is also expanded to multiperiod or lifetime portfolio selection in Samuelson (1969), Merton (1969) and Bodie, Merton and Samuelson (1992).
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Appendix 1
Appendix 1
Overall Model | Immigrants Only | ||||
Variable | VIF | 1/VIF | Variable | VIF | 1/VIF |
Immigrants | 1.08 | 0.925926 | Age | 1.12 | 0.892857 |
Age | 1.02 | 0.980392 | Married | 1.52 | 0.657895 |
Married | 1.59 | 0.628931 | Male | 1.12 | 0.892857 |
Male | 1.04 | 0.961538 | Family size | 1.68 | 0.595238 |
Black | 1.24 | 0.806452 | Children | 1.51 | 0.662252 |
Hispanic | 1.13 | 0.884956 | College & up | 1.3 | 0.769231 |
Asian | 1.02 | 0.980392 | Region (Ref: West) | ||
Family size | 1.66 | 0.60241 | Northeast | 2.62 | 0.381679 |
Children | 1.32 | 0.757576 | North-central | 1.67 | 0.598802 |
College & up | 1.13 | 0.884956 | South | 1.77 | 0.564972 |
Region (Ref: West) | Risk Tolerance | 1.1 | 0.909091 | ||
Northeast | 1.66 | 0.60241 | Log Income Uncertainty | 1.14 | 0.877193 |
North-central | 1.87 | 0.534759 | Log Income | 1.38 | 0.724638 |
South | 2 | 0.5 | Log Net worth | 1.6 | 0.625 |
Risk Tolerance | 1.03 | 0.970874 | Log Tenure | 1.12 | 0.892857 |
Log Income Uncertainty | 1.08 | 0.925926 | Inherit | 1.11 | 0.900901 |
Log Income | 1.54 | 0.649351 | Country of origin (Ref: CAN, EU, ANZ) | ||
Log Net worth | 1.4 | 0.714286 | Mexico | 1.49 | 0.671141 |
Log Tenure | 1.05 | 0.952381 | Asia | 1.54 | 0.649351 |
Inherit | 1.04 | 0.961538 | Eastern Europe | 1.15 | 0.869565 |
Mean VIF | 1.31 | South & Central America | 1.18 | 0.847458 | |
Years of stay | 1.51 | 0.662252 | |||
Mean VIF | 1.43 |
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Chatterjee, S., Zahirovic-Herbert, V. A road to assimilation: immigrants and financial markets. J Econ Finan 38, 345–358 (2014). https://doi.org/10.1007/s12197-011-9224-5
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DOI: https://doi.org/10.1007/s12197-011-9224-5