

Investing in Women-led Fortune 1000 Companies - karenrubin
https://www.quantopian.com/posts/research-investing-in-women-led-fortune-1000-companies

======
gizmo
One possible explanation (pure conjecture) is that this is a consequence of
the still prevalent sexist/old-boys-club mentality. Only the women who are so
exceptional that there can be no question about their capabilities are the
ones who end up on top. And the women who are equally qualified as the typical
male CEO simply don't make it through the gauntlet.

This is an effect that minorities face in general. They have to be the
absolute best in order to break through the glass ceiling. There are plenty of
male CEOs who are utterly mediocre, and mediocre women never get a shot at the
CEO spot.

~~~
stolio
Or, female CEO's are a more risky prospect than male CEO's and companies have
different risk/reward motivations based on their situations. If a company's
facing a tough grind for a few years they may be risk averse and stick with
"safe bets" wherever they can.

Or, years of fighting "the patriarchy" has left females uniquely qualified to
lead companies in the fight against changing market conditions.

Or, prospective female executives are probably very aware of the social and
political climate we live in and that may make _them_ more risk averse in
regards to accepting positions, _they_ may place a higher value on taking
positions at companies on the upswing.

We can do this all day but I doubt the data's going to give a clear answer,
we'll all see what we want to.

------
gjem97
There's no discussion here of survivorship bias [1]. Without a discussion of
how it is addressed, these results are highly suspect. Specifically, the
benchmark takes into account those companies that lost enough value to fall
out of the "bottom" of the index and are therefore not in your current list of
companies. However its far from clear that your subgroup includes similar
companies.

A naive approach to this analysis is as follows. Take all the companies
currently in the Fortune 1000, and look to see which of them has had a female
CEO in the period under study. Backtest with buys and sells on the dates of
hire/termination.

If this is indeed how it was done, the benchmark will almost assuredly
underpeform simply because of the underperformance of components that are no
longer in the index today.

[1]
[http://en.wikipedia.org/wiki/Survivorship_bias](http://en.wikipedia.org/wiki/Survivorship_bias)

------
murbard2
Looking at your graph, it's clear that you need to adjust for volatility. Your
"Women CEO" portfolio is much more volatile during that period. Compare Sharpe
ratios, not total performance.

After that, you may have to worry about dividends. I'm not sure if the
platform takes them into account when you send buy sell order, but if it does,
make sure you look at a portfolio that purchases SPY over that period, not
merely the price, as the appreciation won't reflect the dividends paid.

~~~
karenrubin
The Quantopian backtester pays dividends out in cash, and since I am
rebalancing the portfolio each time I buy or sell stocks, I think that is
covered.

Looking at the volatility is a good suggestion and definitely something to
consider. I noticed the trend as well, but haven't dug into it yet.

~~~
dhammack
You also may want to try betting on the spread between male-only companies and
ones with at least one woman on the board. If the investment thesis is sound
(board gender diversity is beneficial), this would be a good way to test it.
It would also bring you into market-neutral territory.

~~~
karenrubin
I wanted originally to go for board diversity, but haven't found that data set
yet. I believe Morningstar has some of it, and am hoping to get my hands on it
sooner rather than later.

------
fuzzywalrus
The conclusion I'd draw that female CEOs are a indicator of a company culture
likely to be more accepting / more meritocratic / less nepotism internally
which likely makes for a for a more agile company.

Regardless, stats like this hopefully help erode long standing views of women
and leadership.

~~~
mkr-hn
Expressed gender is not a good measure of a person's ability to create (or
maintain) a good working environment.

~~~
UnoriginalGuy
The person above didn't claim otherwise.

They said the opposite, that the culture of the company has to be a certain
way to have a female CEO in a world of mostly male CEOs. They didn't say that
a female CEO creates that culture, and that would have the chicken-egg problem
(i.e. how does a CEO create a culture that within itself helped cause a CEO
get into the role? They could continue it however).

PS - I should clarify that I don't agree with the OP's point about culture. I
actually subscribe to the notion that becoming a female CEO is so difficult
the only ones who manage it are just "that damn good" that their companies do
better.

------
patio11
Many reject the Efficient Markets Hypothesis. Few do so while lying atop a
gigantic pile of money.

~~~
jjoonathan
So if the markets are all efficient then how did they get the pile of money?

~~~
wikwocket
No one has a pile of money. That's the point. Many people come up with
theories on how to beat the market by using some novel theory or algorithm.
These people generally have not successfully tested these theories (and made
the aforementioned piles of money).

(This is why I follow patio11. Reading his tweets and HN comments is not
unlike unpacking a particularly obtuse if-else-if statement block. Difficult,
but rewarding!)

------
q2
If you plot based on blood types of CEO's rather than gender, you may get
other type of results. So should we take blood type as another type of
parameter like gender?

Point I want to make is, people are different starting from blood type,
height, weight to "n" number of parameters and we can get different graphs for
different parameters but that won't conclude anything.

Each person is different and just because some one belongs to a category does
not make that person any extra attractive for any job.

In my personal opinion, this type of validation rather than competence,track
record,experience is not beneficial to organization or society and completely
shortsighted. So please stop these generalizations like "women are so and so",
"men are so and so" ...etc. There are good and bad elements in every category.

~~~
dunster
I think you're looking at the trees, and you should step back and look at the
forest.

The fraction of CEOs that are women is dramatically smaller than the fraction
of the population that are women. There is no qualitative explanation as to
why that should be true. So long as that remains true, it's worth looking into
why it is true. The relative performance of the group is fair game for
investigation.

~~~
refurb
_There is no qualitative explanation as to why that should be true._

I think there are plenty of qualitative explanations especially if look back a
few decades (since most CEOs are in their 50s).

Women didn't obtain the name number of university degrees as men until
recently. Women often step out of the workforce in order to care for family,
etc, etc.

All of these would explain where there would be a smaller pool of qualified
women to take a CEO role.

------
jayshahtx
This reminds me of a study I did on CEOs who came to speak to my university. I
found that investing in a company if their CEO was visiting college campuses
averaged an annual return of ~20%. The logic was that CEOs of poor performing
companies didn't have time to visit schools.

For a disclaimer, the portfolio was also more volatile than most benchmark
indexes, so looking at the Sharpe ratio in both instances (mine and OP's) is
important.

------
bokonist
In the first cut of your analysis (without rebalancing) the portfolio actually
goes negative (I'm looking at the first graph in the notebook). An equity
portfolio cannot go negative unless you are using leverage. Then from late
2012 to 2015 the portfolio rises by 400%. Looking at the companies in the
portfolio, I don't see how they could have generated that kind of return. Is
this algorithm using leverage? If not, I don't see how you can get those
results. If the algorithm is using leverage, then comparing to a simple
investment in the S&P is not valid.

~~~
karenrubin
You are absolutely right that the first version of my algo is using tons of
leverage. I didn't realize what leverage was when I did this the first time.

The second version of the algorithm factors in leverage and there it hovers
around 1.

------
cowardlydragon
How much is this skewed by Alibaba and yahoo?

~~~
cowardlydragon
Also, what would Apple look like for openly gay CEOs?

------
dolant
"Ethical" investment funds also did well for a while. Even if the women in
this study are better CEOs (and that share price reflects this) any attempt to
capitalize on this will change the population. ie assume equal talent pools,
top 30 from each beat top 60 for either.

------
tenpoundhammer
This is really cool, but I'd love to see this narrowed down to something super
scientific. Cause I can already hear the haters, screaming about control
groups, sample sizes, and all that stuff. Which is actually important.

Right now I take it for what it is a quick mock up of some shallow data. But
it seems compelling enough to take a deeper Nate Silver (
[http://fivethirtyeight.com/](http://fivethirtyeight.com/) ) style deep dive.

~~~
karenrubin
I’d love suggestions about how to make this more scientific. I think the
biggest potential pitfall is the variability related to the stock size. My
approach is pretty simple right now. I just took all of the companies from the
Fortune 1000 that had female CEOs since 2002, and bought their stock when they
were women-led, and sold it when they no longer were.

From an investment perspective, I think the best thing to do next would be to
make sure I have the right benchmark. Ideally they Fortune 1000 would be the
best one to use, but I need the historical Fortune 1000 companies for the last
12 years….that will take some manual work to pull together.

At some point, though, the control group is an academic exercise. If the
strategy makes money - invest.

~~~
thorwaaonawngo
In particular, your purchases aren't cap-weighted. You simply divide your
portfolio evenly among women-lead companies. So aside from biases that might
exist for women-led companies (they have to work harder, so they're better
performers; or, they tend to be more highly represented in consumer cyclical,
etc), you're also "over-weighting" small-cap equities, which have done quite
well relative to the S&P500 (all large cap) over the period[0].

I would be interested in a breakdown of other factors, but I expect very
little variance actually derives solely from gender of ownership once you
account for other conventional biasing factors of the chosen index.

[0]: [http://performance.morningstar.com/funds/etf/total-
returns.a...](http://performance.morningstar.com/funds/etf/total-
returns.action?t=VB&region=usa&culture=en-US) (Compare to S&P500 TR)

