IDEAS home Printed from https://ideas.repec.org/p/zbw/hwwirp/164.html
   My bibliography  Save this paper

Immigrant-native differences in stockholding: The role of cognitive and non-cognitive skills

Author

Listed:
  • Luik, Marc-André
  • Steinhardt, Max Friedrich

Abstract

This paper provides new evidence on native-migrant differences in financial behavior by analyzing the role of noncognitive and cognitive skills. We make use of data from the Health and Retirement Survey (HRS) which is a longitudinal household survey of the older U.S. population containing detailed information about demographic characteristics, financial assets and personality traits of household members. In line with previous studies, we find a substantial gap in stockholding between immigrant and native households. Estimates from a random effects model suggest that cognitive and non-cognitive skills, including personality concepts and economic preferences, are important drivers of stockholding and explain part of the differences between natives and immigrants. These findings are supported by results from a Blinder-Oaxaca decomposition analysis. Our paper therefore delivers first evidence that differences in non-cognitive and cognitive skills contribute to the explanation of the financial market participation gap between natives and immigrants.

Suggested Citation

  • Luik, Marc-André & Steinhardt, Max Friedrich, 2015. "Immigrant-native differences in stockholding: The role of cognitive and non-cognitive skills," HWWI Research Papers 164, Hamburg Institute of International Economics (HWWI).
  • Handle: RePEc:zbw:hwwirp:164
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/110952/1/827577206.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Annette Vissing-Jorgensen, 2000. "Towards an Explanation of Household Portfolio Choice Heterogeneity: Nonfinancial Income and Participation Cost Structures," Econometric Society World Congress 2000 Contributed Papers 1102, Econometric Society.
    2. Thomas K. Bauer & Deborah A. Cobb‐Clark & Vincent A. Hildebrand & Mathias G. Sinning, 2011. "A Comparative Analysis Of The Nativity Wealth Gap," Economic Inquiry, Western Economic Association International, vol. 49(4), pages 989-1007, October.
    3. Salamanca, Nicolás & de Grip, Andries & Fouarge, Didier & Montizaan, Raymond, 2020. "Locus of control and investment in risky assets," Journal of Economic Behavior & Organization, Elsevier, vol. 177(C), pages 548-568.
    4. Lex Borghans & Angela Lee Duckworth & James J. Heckman & Bas ter Weel, 2008. "The Economics and Psychology of Personality Traits," Journal of Human Resources, University of Wisconsin Press, vol. 43(4).
    5. Michael Haliassos & Thomas Jansson & Yigitcan Karabulut, 2017. "Incompatible European Partners? Cultural Predispositions and Household Financial Behavior," Management Science, INFORMS, vol. 63(11), pages 3780-3808, November.
    6. Deborah A. Cobb‐Clark & Vincent A. Hildebrand, 2006. "The Wealth And Asset Holdings Of U.S.‐Born And Foreign‐Born Households: Evidence From Sipp Data," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 52(1), pages 17-42, March.
    7. Fortin, Nicole & Lemieux, Thomas & Firpo, Sergio, 2011. "Decomposition Methods in Economics," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 1, pages 1-102, Elsevier.
    8. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde & Jürgen Schupp & Gert G. Wagner, 2011. "Individual Risk Attitudes: Measurement, Determinants, And Behavioral Consequences," Journal of the European Economic Association, European Economic Association, vol. 9(3), pages 522-550, June.
    9. Anke Becker & Thomas Deckers & Thomas Dohmen & Armin Falk & Fabian Kosse, 2012. "The Relationship Between Economic Preferences and Psychological Personality Measures," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 453-478, July.
    10. George J. Borjas & Rachel M. Friedberg, 2009. "Recent Trends in the Earnings of New Immigrants to the United States," NBER Working Papers 15406, National Bureau of Economic Research, Inc.
    11. Conlin, Andrew & Kyröläinen, Petri & Kaakinen, Marika & Järvelin, Marjo-Riitta & Perttunen, Jukka & Svento, Rauli, 2015. "Personality traits and stock market participation," Journal of Empirical Finance, Elsevier, vol. 33(C), pages 34-50.
    12. James J. Heckman & Jora Stixrud & Sergio Urzua, 2006. "The Effects of Cognitive and Noncognitive Abilities on Labor Market Outcomes and Social Behavior," Journal of Labor Economics, University of Chicago Press, vol. 24(3), pages 411-482, July.
    13. Christelis, Dimitris & Jappelli, Tullio & Padula, Mario, 2010. "Cognitive abilities and portfolio choice," European Economic Review, Elsevier, vol. 54(1), pages 18-38, January.
    14. James P. Smith, 1995. "Racial and Ethnic Differences in Wealth in the Health and Retirement Study," Journal of Human Resources, University of Wisconsin Press, vol. 30, pages 158-183.
    15. Rosen, H.S.Harvey S. & Wu, Stephen, 2004. "Portfolio choice and health status," Journal of Financial Economics, Elsevier, vol. 72(3), pages 457-484, June.
    16. Yannis Bilias & Dimitris Georgarakos & Michael Haliassos, 2010. "Portfolio Inertia and Stock Market Fluctuations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(4), pages 715-742, June.
    17. Niklas Hanes & Erik Norlin, 2011. "Psychological Traits and Earnings Differentials among Men: A Study of Second‐generation Immigrants in Sweden," Scandinavian Journal of Economics, Wiley Blackwell, vol. 113(2), pages 318-341, June.
    18. George J. Borjas, 1994. "The Economics of Immigration," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1667-1717, December.
    19. Almlund, Mathilde & Duckworth, Angela Lee & Heckman, James & Kautz, Tim, 2011. "Personality Psychology and Economics," Handbook of the Economics of Education, in: Erik Hanushek & Stephen Machin & Ludger Woessmann (ed.), Handbook of the Economics of Education, edition 1, volume 4, chapter 0, pages 1-181, Elsevier.
    20. Cobb-Clark, Deborah A. & Kassenboehmer, Sonja C. & Sinning, Mathias G., 2016. "Locus of control and savings," Journal of Banking & Finance, Elsevier, vol. 73(C), pages 113-130.
    21. Steffen Andersen & Kasper Meisner Nielsen, 2011. "Participation Constraints in the Stock Market: Evidence from Unexpected Inheritance Due to Sudden Death," Review of Financial Studies, Society for Financial Studies, vol. 24(5), pages 1667-1697.
    22. repec:zbw:rwirep:0455 is not listed on IDEAS
    23. James P. Smith & John J. McArdle & Robert Willis, 2010. "Financial Decision Making and Cognition in a Family Context," Economic Journal, Royal Economic Society, vol. 120(548), pages 363-380, November.
    24. Brown, Sarah & Taylor, Karl, 2014. "Household finances and the ‘Big Five’ personality traits," Journal of Economic Psychology, Elsevier, vol. 45(C), pages 197-212.
    25. Heimer, Rawley Z., 2014. "Friends do let friends buy stocks actively," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PB), pages 527-540.
    26. Swarnankur Chatterjee & Velma Zahirovic-Herbert, 2014. "A road to assimilation: immigrants and financial markets," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 38(2), pages 345-358, April.
    27. Deborah A. Cobb‐Clark & Stefanie Schurer, 2013. "Two Economists' Musings on the Stability of Locus of Control," Economic Journal, Royal Economic Society, vol. 0, pages 358-400, August.
    28. Borghans, L. & Golsteyn, B.H.H. & Heckman, James & Humphries, John Eric, 2011. "Identification problems in personality psychology," Research Memorandum 025, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    29. Puri, Manju & Robinson, David T., 2007. "Optimism and economic choice," Journal of Financial Economics, Elsevier, vol. 86(1), pages 71-99, October.
    30. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2008. "Trusting the Stock Market," Journal of Finance, American Finance Association, vol. 63(6), pages 2557-2600, December.
    31. James P. Smith & John J. McArdle & Robert Willis, 2010. "Financial Decision Making and Cognition in a Family Context," Economic Journal, Royal Economic Society, vol. 120(548), pages 363-380, November.
    32. Yun, Myeong-Su, 2004. "Decomposing differences in the first moment," Economics Letters, Elsevier, vol. 82(2), pages 275-280, February.
    33. Edward N. Wolff, 2010. "Recent Trends in Household Wealth in the United States-- Rising Debt and the Middle-Class Squeeze--An Update to 2007," Economics Working Paper Archive wp_589, Levy Economics Institute.
    34. Carroll, Christopher D & Rhee, Byung-Kun & Rhee, Changyong, 1999. "Does Cultural Origin Affect Saving Behavior? Evidence from Immigrants," Economic Development and Cultural Change, University of Chicago Press, vol. 48(1), pages 33-50, October.
    35. Borjas, George J & Bratsberg, Bernt, 1996. "Who Leaves? The Outmigration of the Foreign-Born," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 165-176, February.
    36. Bartel, Ann P, 1989. "Where Do the New U.S. Immigrants Live?," Journal of Labor Economics, University of Chicago Press, vol. 7(4), pages 371-391, October.
    37. Sayako Seto & Vicki L. Bogan, 2013. "Immigrant Household Investment Behavior And Country Of Origin: A Study Of Immigrants To The United States," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 18(2), pages 128-158, March.
    38. George J. Borjas, 1995. "The Economic Benefits from Immigration," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 3-22, Spring.
    39. Montizaan, Raymond M. & Vendrik, Maarten C.M., 2014. "Misery Loves Company: Exogenous shocks in retirement expectations and social comparison effects on subjective well-being," Journal of Economic Behavior & Organization, Elsevier, vol. 97(C), pages 1-26.
    40. Stephan Meier & Charles D. Sprenger, 2015. "Temporal Stability of Time Preferences," The Review of Economics and Statistics, MIT Press, vol. 97(2), pages 273-286, May.
    41. Catalina Amuedo-Dorantes & Susan Pozo, 2002. "Precautionary Saving by Young Immigrants and Young Natives," Southern Economic Journal, John Wiley & Sons, vol. 69(1), pages 48-71, July.
    42. Xin Meng & Robert G. Gregory, 2005. "Intermarriage and the Economic Assimilation of Immigrants," Journal of Labor Economics, University of Chicago Press, vol. 23(1), pages 135-176, January.
    43. Ben Jann, 2008. "The Blinder–Oaxaca decomposition for linear regression models," Stata Journal, StataCorp LP, vol. 8(4), pages 453-479, December.
    44. Carol C. Bertaut & Michael Haliassos & Michael Reiter, 2009. "Credit Card Debt Puzzles and Debt Revolvers for Self Control," Review of Finance, European Finance Association, vol. 13(4), pages 657-692.
    45. Rémi Piatek & Pia Pinger, 2016. "Maintaining (Locus of) Control? Data Combination for the Identification and Inference of Factor Structure Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 31(4), pages 734-755, June.
    46. Mitchell A. Petersen, 2009. "Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches," Review of Financial Studies, Society for Financial Studies, vol. 22(1), pages 435-480, January.
    47. Dimmock, Stephen G. & Kouwenberg, Roy, 2010. "Loss-aversion and household portfolio choice," Journal of Empirical Finance, Elsevier, vol. 17(3), pages 441-459, June.
    48. Bernt Bratsberg & James F. Ragan & Zafar M. Nasir, 2002. "The Effect of Naturalization on Wage Growth: A Panel Study of Young Male Immigrants," Journal of Labor Economics, University of Chicago Press, vol. 20(3), pages 568-597, July.
    49. Heckman, James J., 2011. "Integrating Personality Psychology into Economics," IZA Discussion Papers 5950, Institute of Labor Economics (IZA).
    50. Una Okonkwo Osili & Anna L. Paulson, 2008. "Institutions and Financial Development: Evidence from International Migrants in the United States," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 498-517, August.
    51. Haliassos, Michael & Bertaut, Carol C, 1995. "Why Do So Few Hold Stocks?," Economic Journal, Royal Economic Society, vol. 105(432), pages 1110-1129, September.
    52. Harrison Hong & Jeffrey D. Kubik & Jeremy C. Stein, 2004. "Social Interaction and Stock-Market Participation," Journal of Finance, American Finance Association, vol. 59(1), pages 137-163, February.
    53. Brad M. Barber & Terrance Odean, 2001. "Boys will be Boys: Gender, Overconfidence, and Common Stock Investment," The Quarterly Journal of Economics, Oxford University Press, vol. 116(1), pages 261-292.
    54. Ronald L. Oaxaca & Michael R. Ransom, 1999. "Identification in Detailed Wage Decompositions," The Review of Economics and Statistics, MIT Press, vol. 81(1), pages 154-157, February.
    55. Alessandro Bucciol & Luca Zarri, 2015. "Does Investors' Personality Influence their Portfolios?," Working Papers 03/2015, University of Verona, Department of Economics.
    56. David Love & Lucie Schmidt, 2015. "Comprehensive Wealth of Immigrants and Natives," Working Papers wp328, University of Michigan, Michigan Retirement Research Center.
    57. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
    58. Joao F. Cocco, 2005. "Consumption and Portfolio Choice over the Life Cycle," Review of Financial Studies, Society for Financial Studies, vol. 18(2), pages 491-533.
    59. Robert B. Barsky & F. Thomas Juster & Miles S. Kimball & Matthew D. Shapiro, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 537-579.
    60. Mark Grinblatt & Matti Keloharju & Juhani Linnainmaa, 2011. "IQ and Stock Market Participation," Journal of Finance, American Finance Association, vol. 66(6), pages 2121-2164, December.
    61. Lusardi, Annamaria, 1998. "On the Importance of the Precautionary Saving Motive," American Economic Review, American Economic Association, vol. 88(2), pages 449-453, May.
    62. Rawley Heimer, 2013. "Friends do let friends buy stocks actively," Working Papers (Old Series) 1314, Federal Reserve Bank of Cleveland.
    63. Yona Rubinstein & James J. Heckman, 2001. "The Importance of Noncognitive Skills: Lessons from the GED Testing Program," American Economic Review, American Economic Association, vol. 91(2), pages 145-149, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jones, A.M.; & Rice, N.; & Robone, S.;, 2018. "The effect of health shocks on financial risk preferences differs by personality traits," Health, Econometrics and Data Group (HEDG) Working Papers 18/07, HEDG, c/o Department of Economics, University of York.
    2. Andreas Hefti & Steve Heinke & Frédéric Schneider, 2016. "Mental capabilities, trading styles, and asset market bubbles: theory and experiment," ECON - Working Papers 234, Department of Economics - University of Zurich.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Salamanca, Nicolás & de Grip, Andries & Fouarge, Didier & Montizaan, Raymond, 2020. "Locus of control and investment in risky assets," Journal of Economic Behavior & Organization, Elsevier, vol. 177(C), pages 548-568.
    2. Kesavayuth, Dusanee & Ko, Kaung Myat & Zikos, Vasileios, 2018. "Locus of control and financial risk attitudes," Economic Modelling, Elsevier, vol. 72(C), pages 122-131.
    3. Guiso, Luigi & Sodini, Paolo, 2013. "Household Finance: An Emerging Field," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, volume 2, chapter 0, pages 1397-1532, Elsevier.
    4. Bucciol, Alessandro & Zarri, Luca, 2017. "Do personality traits influence investors’ portfolios?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 68(C), pages 1-12.
    5. Conlin, Andrew & Kyröläinen, Petri & Kaakinen, Marika & Järvelin, Marjo-Riitta & Perttunen, Jukka & Svento, Rauli, 2015. "Personality traits and stock market participation," Journal of Empirical Finance, Elsevier, vol. 33(C), pages 34-50.
    6. Gomes, Francisco J & Haliassos, Michael & Ramadorai, Tarun, 2020. "Household Finance," CEPR Discussion Papers 14502, C.E.P.R. Discussion Papers.
    7. Cobb-Clark, Deborah A. & Kassenboehmer, Sonja C. & Sinning, Mathias G., 2016. "Locus of control and savings," Journal of Banking & Finance, Elsevier, vol. 73(C), pages 113-130.
    8. Humphries, John Eric & Kosse, Fabian, 2017. "On the interpretation of non-cognitive skills – What is being measured and why it matters," Journal of Economic Behavior & Organization, Elsevier, vol. 136(C), pages 174-185.
    9. Brown, Sarah & Taylor, Karl, 2014. "Household finances and the ‘Big Five’ personality traits," Journal of Economic Psychology, Elsevier, vol. 45(C), pages 197-212.
    10. Vaarmets, Tarvo & Liivamägi, Kristjan & Talpsepp, Tõnn, 2019. "From academic abilities to occupation: What drives stock market participation?," Emerging Markets Review, Elsevier, vol. 39(C), pages 83-100.
    11. Wolfgang Breuer & Michael Riesener & Astrid Juliane Salzmann, 2014. "Risk aversion vs. individualism: what drives risk taking in household finance?," The European Journal of Finance, Taylor & Francis Journals, vol. 20(5), pages 446-462, May.
    12. Gong, Xiaodong & Zhu, Rong, 2019. "Cognitive abilities, non-cognitive skills, and gambling behaviors," Journal of Economic Behavior & Organization, Elsevier, vol. 165(C), pages 51-69.
    13. Dohmen, Thomas, 2014. "Behavioral labor economics: Advances and future directions," Labour Economics, Elsevier, vol. 30(C), pages 71-85.
    14. Michael Berlemann & Marc-André Luik, 2014. "Institutional Reform and Depositors' Portfolio Choice - Evidence from Censored Quantile Regressions," CESifo Working Paper Series 4782, CESifo.
    15. Almenberg, Johan & Dreber, Anna, 2015. "Gender, stock market participation and financial literacy," Economics Letters, Elsevier, vol. 137(C), pages 140-142.
    16. Swarn Chatterjee, 2009. "Immigrants Have Lower Participation Rates In U.S. Financial Markets?," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 3(2), pages 1-13.
    17. Irene Ferrari, 2020. "The nativity wealth gap in Europe: a matching approach," Journal of Population Economics, Springer;European Society for Population Economics, vol. 33(1), pages 33-77, January.
    18. Johnston, David W. & Kassenboehmer, Sonja C. & Shields, Michael A., 2016. "Financial decision-making in the household: Exploring the importance of survey respondent, health, cognitive ability and personality," Journal of Economic Behavior & Organization, Elsevier, vol. 132(PA), pages 42-61.
    19. Lu, Xiaomeng & Guo, Jiaojiao & Gan, Li, 2020. "International comparison of household asset allocation: Micro-evidence from cross-country comparisons," Emerging Markets Review, Elsevier, vol. 43(C).
    20. Maarten C.J. van Rooij & Annamaria Lusardi & Rob J.M. Alessie, 2012. "Financial Literacy, Retirement Planning and Household Wealth," Economic Journal, Royal Economic Society, vol. 122(560), pages 449-478, May.

    More about this item

    Keywords

    Stockholding; Immigrants; Personality traits; Decomposition;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:hwwirp:164. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/hwwiide.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/hwwiide.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.