Employee satisfaction and company/stock performance

Sometimes the “soft” stuff gets pooh-poohed, but here’s some “hard” stuff to back it up.  See this post on the relationship between employee satisfaction and stock returns (here) from the Empirical Finance blog (here). 

The idea here is that human capital is what creates economic value for American firms in today’s ideas-based service economy (human capital, simply refers to these widgets non-economists call “people”–weird)

Theoretically, the stock market should recognize the value firms provide when they create a human capital competitive advantage higher than that of firms who do a poor job of managing their human capital.

How simple is it and how well does it work?

Step 1: In the last week of January when the new Forbes issue hits newsstands–buy it.

Step 2: Either invest your portfolio in all the publically traded companies in the top companies and hold for the long-term (Portfolio I), or hold these companies for a year and rebalance the portfolio when the next issue of Forbes comes out the following year (Portfolio II).

Step 3: Outperform the market.

Nice…  HAT TIP: Hybrid Vigor (here).

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One Response

  1. […] Catriona wrote an interesting post today onHere’s a quick excerptSee this post on the relationship between employee satisfaction and stock returns (here) from the Empirical Finance blog (here). The idea here is that human capital is what creates economic value for American firms in today’s … […]

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