A Baldrige Portfolio: Does Quality Outperform The Market?

Abstract

This paper investigates the claim, by the Department of Commerce, that a portfolio of Baldrige National Quality Award winners outperforms the market.  They find that there is a 92 percent return for Baldrige winners as compared to a 33 percent return on the S&P 500 index.  Their results are published and used to promote “quality” in Department of Commerce press releases.  Our findings do not support their claim that investors can handsomely outperform the market by investing in a Baldrige portfolio.  We find that their study is sensitive to risk measurement and that extending the time horizon alone eliminates any advantage.  Our examination of long-run stock price performance of Baldrige firms also does not support their claim of outperforming the market.