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On the origins of financial development: Ancestral population diversity and financial risk-taking

Author

Listed:
  • Manthos D. Delis

    (Montpellier Business School)

  • Evangelos Dioikitopoulos

    (King's College London)

  • Steven Ongena

    (University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; Centre for Economic Policy Research (CEPR))

Abstract

We show that risk-taking originates in preindustrial ancestral population diversity. We use data on immigrants residing in the United States and show that controlling for all known determinants of portfolio decisions, diversity positively affects stock market participation and asset allocation but not the ownership of bonds or savings accounts. The diversity effect relates to the level of individualism and knowledge in the origin country. Nevertheless, diversity is significant in the presence of more than 100 control variables or when instrumenting diversity with plant variety. Overall, deep-rooted factors unrelated to contemporary social and economic conditions affect risk-taking.

Suggested Citation

  • Manthos D. Delis & Evangelos Dioikitopoulos & Steven Ongena, 2020. "On the origins of financial development: Ancestral population diversity and financial risk-taking," Swiss Finance Institute Research Paper Series 20-53, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2053
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    More about this item

    Keywords

    Stock market participation; Equity share; SIPP; Immigrants; Individualism; Scientific knowledge;
    All these keywords.

    JEL classification:

    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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