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.
Members of the Church of Jesus Christ of Latter-day Saints (Mormons) make up at least half of the citizens in 37 counties. We have 289 brokerage accounts in these counties. Of these accounts:
- 0.69% own an alcohol stock (compared to 1.39% in all counties)
- 3.11% own a tobacco stock (compared to 5.79% in all counties)
- 1.73% own a gaming stock (compared to 3.23% in all counties)
From these results we note that in Mormon dominated counties, people's ownership in all three sin stocks is much lower then in all counties. That is, Mormons do appear to shy away from owning the stock of companies in the alcohol, tobacco (because of the nicotine), and gaming industries. Mormons do believe that alcohol and tobacco use is a sin. A survey of practicing Mormon asked them if they thought their church had a prohibition on drinking alcohol-95.5% thought so.
What about Pepsi and Coke? Although there has been no outright ban on the consumption of caffeine, there are frequent statements in Ensign (the official magazine of the church) about the ill effects on health caused by caffeine and Mormon church leaders advise against harmful habit-forming drugs, including caffeine. Most recently in the December 2008 Ensign. Investments in Coke and Pepsi stock is 4.84% for the counties that are at least half Mormon and 8.25% for the entire sample.
So what do we conclude? Mormons do seem to act like alcohol, tobacco, and gaming represent sin. They also seem to follow the church's wishing regarding caffine. Thus, they avoid owning the companies that produce those products. Their actions appear consistent with their beliefs.
Want to see the sin stock ownership in Catholic and Protestant counties?
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.
