Do
religious people put their money where their morals are?
Investors may seek both utilitarian and expressive benefits from their investments. The utilitarian benefits are investment risks and rewards. Expressive benefits vary depending on the individual, but investors may seek status, patriotism, consistency with social and religious beliefs, etc. For example, socially progressive investors may seek companies with good environmental records or good employee relations. Religious investors may seek to avoid investing in ‘sin' stocks, such as those associated with alcohol, tobacco, gaming, pornography, and weapons. Or do they? Sin stocks often offer a solid return with moderate risk.
Data: We observe the religious nature of each county in the United States and the ownership of such classic sin stocks as alcohol, tobacco, and gaming. To do this, we use the religious makeup of each county from a church membership study conducted in 2000 by the Association of Statisticians of American Religious Bodies and combine it with stock brokerage accounts from a discount brokerage from 1991 to 1996. In all, there are nearly 42,000 brokerage accounts in 2,419 counties.
Catholics make up at least half of the citizens in 107 counties. We have 2,602 brokerage accounts in these counties. Of these accounts:
- 1.23% own an alcohol stock (compared to 1.39% in all counties)
- 6.73% own a tobacco stock (compared to 5.79% in all counties)
- 3.34% own a gaming stock (compared to 3.23% in all counties)
From these results we note that alcohol stock ownership in Catholic dominated counties is not much different then in all counties. In other words, Catholics do not appear to shy away from owning the stock of companies in the alcohol industry. This may not be surprising to Catholics. A survey of practicing Catholics asked them if they thought their church had a prohibition on drinking alcohol-only 26% thought so. Investors in Catholic dominated counties actually owned more tobacco stocks! Nearly one percent higher ownership. Actually, Catholics may not think of tobacco as a sin either. Opposition to tobacco mostly started in the 1950s when scientific evidence mounted about its health risks. Lastly, note that ownership of gambling stocks in Catholic counties is about the same as in other counties. Of course, bingo is a tradition in many U.S. Catholic churches.
So what do we conclude? Catholics do not seem to act like alcohol, tobacco, and gaming represent sin. Thus, they have no reason to specifically avoid the companies that produce those products.
Click here to see the Mormon and Protestant ownership of sin stocks!
Would you skip a good return to be consistent with your beliefs?
This posting is co-authored with Matthew Hood at the University of Southern Mississippi.
References:
Matthew Hood, John Nofsinger, and Abhishek Varma, 2009, "Sin Stocks and the Religious Investor," Washington State University working paper, January.
Michalak, L., K. Trocki, and J. Bond, 2007. Religion and alcohol in the U.S. National Alcohol Survey: How important is religion for abstention and drinking? Drug and Alcohol Dependence 87, 268-280.
Statman, Meir, 2004. What do investors want? Journal of Portfolio Management 30th Anniversary Issue, 153-161.
