Events at CERGE-EI

Monday, 6 May, 2019 | 14:00 | Applied Micro Research Seminar

Jonas Hjort, Ph.D. (Columbia U.) “Ethnic Investing and the Value of Firms”

Jonas Hjort, Ph.D.

Columbia University, New York, USA


Authors: Jonas Hjort, Changcheng Song, and Christopher Yenkey

Abstract: We study ethnic investing, using transaction level data from Kenya's stock exchange (NSE) and CEO/board turnover. We first show that a given investor invests more in a given firm when the firm is run by coethnics, and earns lower risk-adjusted returns on such investments. Theory predicts that, other things equal, neglect of a subset of investment objects---such as the taste- or psychology-driven ethnic investing we uncover---will lower aggregate value creation. We find that compensating supply-side responses and arbitrage are limited. Our estimates imply that Kenya's publicly listed firms could have been worth considerably more if investors ignored management's ethnicity.