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Language Skills and Stock Market Participation: Evidence From Immigrants

Author

Listed:
  • Gan, Xu
  • Song, Frank M.
  • Zhou, Yang

Abstract

Do language skills affect investment decisions? This article addresses this question by identifying the effect of English proficiency on the stock market participation of immigrants in the United States and Australia. To establish causality, we construct an instrumental variable for English proficiency by exploiting the phenomenon that younger children acquire languages more easily than older children. We find that English proficiency has a significant positive effect on stock ownership among immigrants in both countries. Moreover, we provide evidence that a reduction in information costs and an increase in trust may serve as the mechanisms underlying the language ability effect.

Suggested Citation

  • Gan, Xu & Song, Frank M. & Zhou, Yang, 2022. "Language Skills and Stock Market Participation: Evidence From Immigrants," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 57(8), pages 3281-3312, December.
    • Handle: RePEc:cup:jfinqa:v:57:y:2022:i:8:p:3281-3312_13
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    Cited by:

    1. Fatima, Shumaila & Chakraborty, Madhumita, 2025. "Does mobile phone proficiency contribute to stock market participation? The role of payment convenience, liquidity, and social interaction," Economic Modelling, Elsevier, vol. 144(C).
    2. Meister, Lorenz & Menkhoff, Lukas & Schröder, Carsten, 2025. "Stock market participation, work from home, and inequality," International Review of Financial Analysis, Elsevier, vol. 107(C).
    3. Gan, Hongwu & Guo, Mengmeng & Li, Jian & Niu, Geng & Zhou, Yang, 2025. "Air pollution and household stock market participation," Journal of Banking & Finance, Elsevier, vol. 172(C).
    4. Luik, Marc-André & Steinhardt, Max Friedrich & Voss, Simon, 2025. "Language proficiency and homeownership: Evidence from U.S. immigrants," Journal of Housing Economics, Elsevier, vol. 68(C).
    5. Li, Yong & Mao, Kun & Gan, Hongwu & Zhou, Yang, 2025. "Climate risk and household stock market participation," China Economic Review, Elsevier, vol. 94(PC).

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