Should You Invest in Stocks of Racially Diverse Companies?

Abstract

In today's business environment, many firms passionately debate the impact of racial and gender diversity, particularly how a diverse workforce affects analytical thinking and innovation. To learn more, we examined the effects of diversity on the risk-adjusted performance of stocks from the 33 most diverse corporations. Using traditional portfolio performance indicators, we examined risk-adjusted performance from 2000 to 2020. We found that diverse companies outperformed stock market benchmark indices in most cases. We also discovered that an equally-weighted portfolio of the 33 most diverse firms outperformed the risk-adjusted performance of the Dow Jones Industrial Average (DJIA), the Standard & Poor 500 index (S&P500), and the NASDAQ.