Pro-Dem companies outperform pro-GOP
by jcjcjc, Tue Oct 10, 2006 at 07:36:51 AM EDT
As a committed business Democrat -- a true Kool-Aid drinking believer in the Dems' business policies -- I found this article very interesting:
According to the firm's research paper, "The Blue Factor," an index of 76 companies in the S&P 500 meeting certain ethical criteria and favoring Democrats -- "blue" stocks -- would have topped a group of about 380 Republican "red" stocks by 15.6 percentage points annualized over the five years through August.
Trading in a five-year range, the pro-Democratic companies more than doubled the return of the pro-Republican companies.
Of course, there are huge ranges of questions about anything like this. Beyond the obvious sample-related questions, even if you accept the result you have to ask the question: "What does it say about those businesses?"
One argument is that good practices are good practices. Environmentalism promotes efficiency, and efficiency never hurts the bottom line. Better pay promotoes productivity. Better health care ensures a stable and happy work force.
An additional argument is that Republicans are just plain corrupt. Corruption, especially institutionalized corruption like we see in the GOP, brutalizes the bottom line. Corruption becomes an unrecoverable sunk cost. As such, it erodes profit heavily over time.
And then there is the question of how smart are Republicans.
To be honest, in order to believe in markets, you almost have to believe the third explanation is the explanation. In an unbiased game with many options, eventually ethical and moral factors even out. If an unethical player can advance, eventually the ethical players will copy him (look at the stock option back-dating scandal). And the reverse is true also; if the ethical player can advance, the unethical player will change his tactics to match (look at manufacturing finding religion on efficiency).
In the long run, the smart player makes the smart play with little serious regard for more than the returns and the risks involved.
So, does the empirical evidence suggest that Republican compoanies just aren't the smart players?
Or does something else give?