AGENDA

• Project Objective
• The Data
• The Model
• Conclusion
• Appendix

1
PROJECT OBJECTIVE

2
GENDER DIVERSITY IN US CORPORATIONS
• Women are severely under-
represented on corporate
boards and executive teams
• Qualitative research suggests
that gender diversity could
improve decision-making and
operations

3
OBJECTIVE
• To understand various factors
driving 5 year stock returns
among US companies
• Derive conclusions about the
role of gender diversity in
company performance

4
KEY QUESTIONS
• What are the key indicators
that predict company
performance?
• Sample: Russell 1000
• Dependent variable: 5-year
returns

• How important is gender

diversity in a predictive
model?

5
THE DATA

6
THE DEPENDENT VARIABLE (5YR RETURN)
• Top Performers Histogram of 5YR Return
• Medivation 1 80

• Piligrim's Pride Corp. 1 60

• Rite Aid 1 40

1 20

Losers

Frequency
• 1 00

• Fossil Group 80

• Ensco CL A 60

40
• Denbury Rsc De
20

0
-1 5 0 15 30 45 60
5YR Return

7
THE INDEPENDENT VARIABLES
Variable Definition

1YR Return 1 year total return of the stock. This is often used as a ‘Momentum’ factor.

Dividend Yield Dividend expressed as a % of stock price.

Market Cap Price * shares outstanding.

% Women on Board Percentage of women on the Board of Directors, as reported by the company.

% Female Executives Number of female executives as a percent of total executives at last fiscal year end.

PB Ratio Ratio of stock price to book value per share.

PE Ratio Ratio of stock price to earnings per share.

Beta Measure of sensitivity of the stock to changes in the S&P 500.

Industry The industry classification based on the stock's business or economic function

ALL DATA SOURCED FROM BLOOMBERG 8

DESCRIPTIVE STATISTICS

1YR Dividend % Women % Female

5YR Return Market Cap PB Ratio PE Ratio Beta
Return Yield on Board Executives

Mean 12.52 -1.14 2.01 24458.95 17.73 13.68 5.94 32.62 1.01

Standard
10.65 23.51 1.83 48291.68 9.42 12.55 20.94 90.11 0.27
Deviation

Largest 63.74 119.57 12.81 553672.47 50.00 100.00 437.33 1250.35 2.96

Smallest -25.00 -82.09 0.00 759.96 0.00 0.00 0.11 2.57 0.28

Range 88.74 201.66 12.81 552912.51 50.00 100.00 437.22 1247.79 2.68

ALL DATA SOURCED FROM BLOOMBERG 9

HISTOGRAMS: GENDER DIVERSITY
Histogram of % Female Executives Histogram of % Women on Board
250
1 00

200
80

1 50

F re q u en c y
F re q u en c y

60

1 00 40

50 20

0 0
0 15 30 45 60 75 90 0 8 16 24 32 40 48

% Female Executives % Women on Board

ALL DATA SOURCED FROM BLOOMBERG 10

CORRELATION MATRIX
Telecom
5YR 1YR Dividend % Women % Female Consumer Health Consumer
Market Cap PB Ratio PE Ratio Beta Oil & Gas Industrials municati Utilities Financials Technology
Return Return Yield on Board Executives Goods Care Services
ons

5YR Return 1.00

1YR Return 0.47 1.00

Dividend Yield -0.15 0.06 1.00

Market Cap 0.13 0.11 0.06 1.00

% Women on Board 0.03 0.04 0.09 0.20 1.00

% Female Executives 0.02 0.05 0.12 0.12 0.26 1.00

PB Ratio 0.10 0.07 -0.01 0.04 0.02 0.10 1.00

PE Ratio 0.01 0.00 -0.12 0.01 -0.07 -0.06 0.01 1.00

Beta -0.32 -0.51 -0.18 -0.05 -0.08 -0.10 -0.06 0.02 1.00

Oil & Gas -0.27 -0.17 0.10 0.04 -0.08 -0.08 -0.04 0.17 0.26 1.00

Industrials -0.03 0.01 -0.13 -0.09 -0.11 -0.06 -0.01 -0.04 0.16 -0.10 1.00

Consumer Goods 0.14 0.08 -0.05 -0.01 0.07 -0.01 0.12 -0.05 -0.09 -0.07 -0.17 1.00

Health Care 0.13 -0.05 -0.21 0.09 0.07 0.05 -0.01 0.05 -0.11 -0.06 -0.15 -0.11 1.00

Consumer Services 0.07 -0.15 -0.09 0.02 0.10 0.04 0.08 -0.04 -0.02 -0.08 -0.20 -0.14 -0.12 1.00
Telecommunication
-0.05 0.02 0.04 0.10 0.00 -0.01 -0.01 -0.01 -0.02 -0.02 -0.05 -0.03 -0.03 -0.04 1.00
s
Utilities 0.03 0.28 0.16 -0.04 0.07 0.12 -0.03 -0.03 -0.29 -0.05 -0.12 -0.09 -0.07 -0.10 -0.02 1.00

Financials -0.03 0.03 0.27 -0.06 -0.03 0.01 -0.07 -0.01 -0.12 -0.11 -0.27 -0.20 -0.17 -0.23 -0.05 -0.13 1.00

Technology -0.06 -0.02 -0.09 0.10 -0.08 -0.07 -0.02 0.06 0.20 -0.06 -0.15 -0.11 -0.09 -0.13 -0.03 -0.07 -0.17 1.00

11
1YR RETURN VS 5YR RETURN
1YR Return vs. 5YR Return
70
y = 0.2129x + 12.761
60
R² = 0.2206
50
40
30
20
10
0
-10
-20
-30
-100 -50 0 50 100 150

12
BETA VS 5YR RETURN
Beta vs. 5YR Return
70
60
50
40 y = -12.48x + 25.165
R² = 0.1014
30
20
10
0
-10
-20
-30
0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50

13
% WOMEN ON BOARD VS 5YR RETURN
% Women on Board vs. 5YR Return
70
60 y = 0.0371x + 11.859
50 R² = 0.0011
40
30
20
10
0
-10
-20
-30
0.00 10.00 20.00 30.00 40.00 50.00 60.00

14
% FEMALE EXECUTIVES VS 5YR RETURN
% Female Executives vs. 5YR Return
70
60
y = 0.0166x + 12.29
50 R² = 0.0004
40
30
20
10
0
-10
-20
-30
0.00 20.00 40.00 60.00 80.00 100.00 120.00

15
THE MODEL

16
OUR APPROACH: FULL MODEL VS
REDUCED MODEL
1. Create a “full model” with all independent variables
2. Create a “reduced model”, excluding the gender diversity
variables
3. Run a hypothesis test to see if the gender diversity variables
are significant in the predictive power of the full model

17
THE FULL MODEL: ANOVA

Adjusted R square: 33.19%

18
MULTICOLLINEARITY NO PROBLEM, DUDE

19
HETEROSCEDASTICITY AIN’T NO THANG

20
THE REDUCED MODEL: ANOVA

21
THE REDUCED MODEL: MODEL SUMMARY

22
NULL HYPOTHESIS: FAIL TO REJECT

The critical value of F with alpha = 5%, 3 numerator d.f.

2
and 729 denominator d.f. = 2.62

3 Actual F = 0.522
Reduced
Full Model
Model
R Square 34.71% 34.57%
Adjusted R Square 33.19% 33.23%
23
FOR GOOD MEASURE: BEST SUBSETS
REGRESSION

24
CONCLUSION

25
CAVEATS AND CONCERNS
• Conclusion: Gender diversity doesn’t
improve the predictive power of other
independent variables such as beta
and PE ratios for 5-year returns
• Caveats:
• Insufficient time duration - perhaps 5 years
is insufficient
• Lacking critical mass - % of women on
boards and % of female executives are
very low
• Further research needed - future research
is possible as companies continue to
diversify
• Disease of available information - private
companies and public companies may
illustrate a different conclusion

26
APPENDIX

27
HISTOGRAMS: MARKET CAP AND DIV YIELD
Histogram of Market Cap Histogram of Dividend Yield
1 80
400

1 60

1 40
300

1 20
F re q u en c y

F re q u en c y
1 00

200
80

60

1 00
40

20

0 0
0 80000 1 60000 240000 320000 400000 480000 560000 0 2 4 6 8 10 12

Market Cap Dividend Yield

ALL DATA SOURCED FROM BLOOMBERG 28

HISTOGRAMS: PB RATIO AND PE RATIO
Histogram of PB Ratio Histogram of PE Ratio

700 600

600 500

500
400
F re q u en c y

F re q u en c y
400

300

300

200
200

1 00
1 00

0 0
0 60 1 20 1 80 240 300 360 420 0 200 400 600 800 1 000 1 200

PB Ratio PE Ratio

ALL DATA SOURCED FROM BLOOMBERG 29

HISTOGRAMS: 1YR RETURN AND BETA
Histogram of 1 YR Return Histogram of Beta
1 60
1 20

1 40

1 00
1 20

1 00 80

F re q u en c y
F re q u en c y

80
60

60
40

40

20
20

0 0
-60 -30 0 30 60 90 1 20 0.4 0.8 1 .2 1 .6 2.0 2.4 2.8

1 YR Return Beta

ALL DATA SOURCED FROM BLOOMBERG 30

DIVIDEND YIELD VS 5YR RETURN
Dividend Yield vs. 5YR Return
70
60
50 y = -0.8891x + 14.302
40 R² = 0.0233
30
20
10
0
-10
-20
-30
0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00

31
MARKET CAP VS 5YR RETURN
Market Cap vs. 5YR Return
70
60 y = 3E-05x + 11.794
50 R² = 0.018
40
30
20
10
0
-10
-20
-30
0 100,000 200,000 300,000 400,000 500,000 600,000

32
PB RATIO VS 5YR RETURN
PB Ratio vs. 5YR Return
70
y = 0.0489x + 12.227
60
R² = 0.0092
50
40
30
20
10
0
-10
-20
-30
0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0

33
PE RATIO VS 5YR RETURN
PE Ratio vs. 5YR Return
70
60 y = 0.0018x + 12.459
50 R² = 0.0002
40
30
20
10
0
-10
-20
-30
0 10 20 30 40 50 60 70 80 90 100

34
THE REDUCED MODEL: RESIDUAL PLOTS

35