
Women-led companies perform three times better than the S&P 500 - mijustin
http://fortune.com/2015/03/03/women-led-companies-perform-three-times-better-than-the-sp-500/
======
facepalm
In a 12 year period. So what about a 15 year period? Or a 20 year period? Or
in a 12 year period but 10 years ago?

Results like that are generally bunk, or if they really cared, they would have
made a broader statement (in these and those periods they performed like
that).

I have only looked at the Credit Suisse paper that I think started this meme,
and they clearly use a cut off point that makes women led companies look good.
If they start their comparison a couple of years earlier, suddenly it looks
different.

That's just standard methodology for companies like Credit Suisse whose main
business is convincing people to buy stock. That same method is used to make
stock market funds look good all the time (so that gullible people pay the 5%
premium for the seemingly brilliant manager of that fund).

Other explanations of course could be: categories of businesses were trending
that were more attractive to women (like digital services vs mining or
something like that). Or the market in the time favored a risk averse approach
and women tend to be more risk averse (don't know that) - there was a bad
economical recession in that period of time (as they claim women "manage risk
better" \- well there are times when more or less risk taking are called for).

Don't get me wrong, I don't mind if women are CEOs and lead companies. I'm
just wary of "narratives" that sound too good or too ideologically motivated.

~~~
qiqing
1\. A colleague of the author has commented in a lower thread that 12 years
was the size of the data set available.

2\. If n is very small in a several-year period, you wouldn't be able to do
meaningful analyses on that period. How many women CEO's were there in the
Fortune 1000 in the 80's? 90's? I'm going to guess epsilonically few.

3\. Possible explanation that isn't hand-waving: selection bias, somewhat akin
to the immigration effect. Because it's more challenging for women to get on a
career path that eventually leads them to become a CEO, only the most
determined/resourceful/hardworking will get there and be measured in the
sample, whereas fewer men get weeded out. (e.g., IQ scores of H1B recipients
from Asia is not representative of Asia as a continent, where IQ is a standin
for whatever measurable trait you want here; and overall Asia and North
America may well be quite comparable along most dimensions.)

~~~
facepalm
So suppose they had done the study, and found no improved performance for
women. Would they have published it? I guess the chance to get a result was
roughly 50% (since stocks tend to go up or down, and the sample set of women-
ceo-companies is probably small).

As to your explanation 3: that's just the kind of thing people want to believe
who cherish such studies. At the same time there were also women who failed as
CEOs (as the article said). Sure, it's a valid hypothesis, but there would be
many ways to test it. For starters, there must already be studies correlating
IQ to CEO success. What do they say?

------
jstauth
Here is a link to a companion post to the Fortune article with more detail on
the study: [https://www.quantopian.com/posts/research-an-update-to-
inves...](https://www.quantopian.com/posts/research-an-update-to-investing-in-
women-led-companies)

You can check out the full analysis and data set in a shared IPython notebook.

The study was done over a 12 year period because that's the full length of the
pricing data available in the backtester Karen was using to do the study. It
would be interesting to extend the analysis back in time as well.

NB: I work with Karen at Quantopian and we both have two X chromosomes :)

~~~
fsk
If you have a Bloomberg terminal, you can get more pricing.

Also, if you have a source of split-and-dividend-adjusted prices, you don't
have to do a daily simulation, you can just simulate on the days when there is
a buy or a sell.

Also, why does the leverage vary? Shouldn't it be 1.0 every day?

------
stolio
> ...finding that women CEOs in the Fortune 1000 drive three times the returns
> as S&P 500 enterprises run predominantly by men.

Apples to oranges. Why not compare female-CEO companies in the Fortune 1000 to
male-CEO companies from the Fortune 1000? Why not include how male-CEO
companies from the Fortune 1000 compare to the S&P 500? Why not compare
female-CEO companies in the S&P 500 to male-CEO companies in the S&P 500 to
the average company in the S&P 500?

Most importantly, why do people's critical thinking skills go right out the
window when female positive news stories hit?

~~~
karenrubin
Lack of data. If I could find the historical lists of the S&P500 including CEO
gender, or the entire list of Fortune 1000 companies by year, I'd look at any
of the alternatives you suggest. The reality is getting the data is pretty
tough, so we work with what we have. I've actually just gotten a dump of data
from Morningstar that should allow me to expand the scope, but as with
everything, there is work involved to make it usable....so stay tuned.

~~~
stolio
OK, I've spent too much time on this.

First, sorry but no excuses for releasing questionable studies that will
spread like wildfire due to confirmation bias. Just because something is 'girl
positive' doesn't mean we should all abandon our critical thinking skills.
It's a small fraction of these feminist studies that go viral that can
withstand any amount of scrutiny which makes the movement look worse.

I figured out how to get Fortune 1000 companies arbitrarily far back, and the
S&P500 back to 2005. But the information is under copyright. I spent a long
time thinking about the implications of helping you subvert copyright and
decided that it's not something I'm going to do even though I'd like to see
the study done better.

If you want the 2014 Fortune 1000 with contacts (i.e. CEO names) it costs
$1799 from Fortune, the historical data from 1996-2013 costs $399/yr though
it's unclear if that includes CEO names.
([http://www.fortunedatastore.com/](http://www.fortunedatastore.com/))
Fortune's contact for historical data is female, she may be sympathetic to
your cause. The S&P500 data might cost another $5-10k.

Since what you're doing is commercial your company has a responsibility to go
through the proper channels to get your data. Really, the project is being
used for advertising and brand-recognition. I also think your company has a
responsibility to make sure you have the data you need to do proper analysis
when you're representing the company.

Honestly I can't believe a company focused on quantitative market analysis
doesn't already have this data!

Once you have CEO names it should be fairly straightforward to assign gender.

------
dunster
The Fortune article refers to analysis done by my colleague Karen Rubin.

The research was done in an IPython notebook, on the Quantopian platform. You
can see (and copy) the full notebook here:
[https://www.quantopian.com/posts/research-investing-in-
women...](https://www.quantopian.com/posts/research-investing-in-women-led-
fortune-1000-companies)

------
lifeisstillgood
How about, instead of attackin the methodology, in some suspiciously
misognistic approach to proving women cannot be the cause, we propose some
hypothesis for why this might be true.

\- women in business today are like female scientists of merely one or two
generations ago. Only the brilliant / driven can overcome the obstacles, and
brilliant driven people will outperform, and as CEO they drive the company to
perform.

\- companies that have sufficient internal mobility that a female CEO is able
to be appointed, also are likely to have many other qualities that will allow
the company to outperform.

Personally I prefer the second as an explanation for why the companies shown
are doing better, and the first as an explanation of why those particular
women are CEOs. (I'm not a big fan of the superstar CEO theory)

Thoughts?

~~~
Kalium
> Thoughts?

Yes. We should take methodological criticism seriously.

If the methodology is flawed, why should effort be put into searching for
hypotheses? If the methodology is flawed, then the results are not valid, and
any hypotheses are meaningless as well.

------
barry-cotter
Free Money! Just buy the stock of all Wiltshire 5000 companies with a female
CEO and we should be good. Who wants to subscribe to my index fund?

More seriously there's research on company performance before and after either
Norway or Sweden put a quota of woman members on company boards. I have heard
differing things on it, positive and negative and would be delighted if
someone who wasn't skiving off work could add to the discussion by citing some
of that research. In general female and male executives are dissimilar in
their career trajectories. Women are much more likely to be company lifers for
one. That's not going to be the only difference but it is plausible that there
are more intervening factors than whether or not the CEO has XX chromosones.

~~~
facepalm
Maybe CEOs of ill performing companies are more likely to be fired, and their
replacement less likely to be a woman (since there are few candidates
overall).

Just guessing - that's probably not it. But I think results like that are
generally interesting as something seems to be going on. I just can't stand it
if people jump to conclusions, usually to the ones that support their biases.
It would be great to learn what is really going on.

------
arfliw
Selection bias. Only the best and brightest get to run companies. Much easier
for men to run companies. Which obviously says something bad about our society
- but it does not mean that women run companies better than men.

------
qiqing
Hey moderators, did this set off the flamewar detector? Because I don't think
that's the article's fault, and people may well have things to say that aren't
flamebait.

Current count of comments = 31; points = 37.

------
jlawer
I wonder if this is more an effect that because a fewer number of women become
leaders of the companies that the leaders they get are better then average.

Similarly to how during World War 2 when African American pilots were finally
allowed to fly (The Tuskegee Airmen) they outperformed many other squadrons
due to all the barriers put up ensured that they had the most dedicated,
smartest and toughest pilots.

------
fsk
My concern is that he didn't calculate internal rate of return (IRR)
correctly, and adjust for market conditions when the female CEO was
hired/fired. It's hard to tell without verifying the details.

For example, suppose a company hired a female CEO during the market bottom in
2002 and fired her before the crash in 2008. Then, that would cause the
"female CEO" statistic to be inflated relative to the S&P 500. If you
calculate the relative IRR, it's more correct.

I.e., instead of a buy-and-hold S&P 500 investment vs buying/selling when the
female CEO is hired/fired, you should instead buy $100k of the S&P 500 and
female CEO stock SIMULTANEOUSLY, and then cash out both holdings when the
female CEO is fired.

If you buy-and-hold the S&P 500 for 12 years vs buy/sell during a female CEO
tenure, that's an apples-to-oranges comparison. That isn't properly adjusting
for the market conditions when the female CEO was hired/fired.

He didn't provide enough details for me to check. I'd need a list of female
CEO Tickers, hire/fire dates, and split-and-dividend-adjusted share price on
the two dates.

~~~
dunster
There's a slightly different methodology here, but one consistent with what
you're looking for.

On one line, buy-and-hold the S&P 500. Re-invest all dividends. You are 100%
in the market at all times.

On the other line, buy-and-hold all companies run by female CEOs, weighted by
the number of companies. Rebalance your portfolio every time a company is
added or removed. You are 100% in the market at all times.

I think that if you look at the IPython notebook that the Fortune article
refers to you can find the details spelled out in code.

(FWIW, the calculations are done by a she, not a he! It's my colleague Karen.)

~~~
fsk
What link?

The method you mention is correct. It wasn't clear reading the article that
was what she did.

I'm looking for the raw list of female CEOs, Tickers, and hire/fire dates. I'm
also wondering if the results are different based on sector.

------
Toast_
oh look—a provocative headline with poor science, practicing poor prudence.
Clearly, no one's trying to make money, especially not fortune.com /s

------
spectrum1234
Couldn't this just mean that firms who hire a new CEO regardless of gender see
an increase in stock price?

If they did the same test but for any new CEO I wonder what the results would
be.

------
spectrum1234
"You’ve heard that companies with women executives at the helm tend to perform
better than those led by men..."

What a nice sexist introduction.

~~~
scintill76
"Now anyone who disagrees, has never actually heard this, or is bothered by
opening with a sweeping prejudiced claim, has stopped reading. Let us proceed
to strengthen the confirmation bias of those still reading..."

------
a8da6b0c91d
Companies can afford the marketing luxury of a female CEO when they're on the
upswing. Companies fighting to survive appoint ugly fat dudes.

------
tomlock
It really should be no surprise that these progressive companies have
performed better than average. Society places higher expectations on women, so
of course they must overperform!

