Population diversity and financial risk-taking

We hypothesize that financial risk-taking originates in preindustrial interpersonal population diversity. We use data on immigrants residing in the United States and show that controlling for all known determinants of portfolio decisions and more than 100 control variables, diversity in the country of immigrants' origin positively affects stock market participation and the level of risky asset holdings. Our results remain robust when instrumenting diversity with plant variety. We also identify the channels through which the effect of diversity operates (mostly individualism and human capital), but also conclude that diversity exerts an independent effect.