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A road to assimilation: immigrants and financial markets

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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

  1. 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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Correspondence to Swarnankur Chatterjee.

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

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