Protestants: Faith and Stocks

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.

Many of the Christian religions can be categorized as being mainline Protestant or evangelical Protestants. What is the difference? Mainline Protestants have a more modern theology that takes more moderation and inclusive stance in relation to translations of the Bible, new ideas, and societal changes. The larger mainline Protestant denominations include American Baptist Churches, Disciples of Christ, Episcopal Church, ELCA, Presbyterian Church, United Church of Christ, and United Methodist Church. Evangelical Protestants believe in the need for personal conversion to Christ and to spread the word (evangelize). They also have a more traditional and unchanging interpretation of the Bible. Thus, they are less tolerant of changing societal pressures. The larger evangelical Protestant denominations are Assemblies of God, Christian Churches, Churches of Christ, Lutheran (Missouri Synod), and Southern Baptists.

Mainline Protestants make up at least half of the citizens in 55 counties. We have 296 brokerage accounts in these counties. Of these accounts:

• 2.03% own an alcohol stock (compared to 1.39% in all counties)
• 8.78% own a tobacco stock (compared to 5.79% in all counties)
• 3.04% own a gaming stock (compared to 3.23% in all counties)

Evangelical Protestants make up at least half of the citizens in 262 counties. We have 231 brokerage accounts in these counties. Of these accounts:

• 1.73% own an alcohol stock (compared to 1.39% in all counties)
• 6.49% own a tobacco stock (compared to 5.79% in all counties)
• 5.19% own a gaming stock (compared to 3.23% in all counties)

Here we see that alcohol company stock ownership is larger in mainline counties compared to evangelical counties and (lastly) all counties. Mainline dominated counties also own more tobacco stocks. However, mainline counties gaming stock ownership is about the same as all counties. Evangelical gaming ownership is significantly higher. So, Protestants do not seem to have a problem owning alcohol or tobacco stocks, with mainline Protestants showing some enthusiasm. Protestants also own gaming stocks, with evangelical Protestants showing some enthusiasm for it.

So what do we conclude? Protestants 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. There is some difference between evangelical and mainline Protestants.

Want to see the stock ownership in Catholic and Mormon dominated 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.

Statman, Meir, 2004. What do investors want? Journal of Portfolio Management 30th Anniversary Issue, 153-161.