War Profiteering Comparing Military-Industry Stock Portfolio Returns versus Market Returns During the Iraq and Afghan Wars

The Department of Defense (DoD) relies on a privatized defense industry for tools of war. Following the Cold War, the majority of this Defense Industry consolidated into 5 large corporations: Boeing, United Technologies Corporation, Honeywell, Raytheon, and Lockheed Martin. In this study, an equally weighted portfolio of the 5 aforementioned companies stocks is constructed, and then analyzed during Operation Iraqi Freedom (OIF) and Operation Enduring Freedom (OEF). The equally weighted portfolio is then compared to the market to see whether or not a defense-industry portfolio can outperform the market during wartime. Both the portfolio and the market index are assessed by average monthly return and the Sharpes Slope. These metrics are compared between the portfolio and the market through a Difference in Means Statistical Test.