This paper investigates the consistent outperformance of sin stocks - companies in sectors such as gaming, tobacco, and alcohol - relative to peers and the market. The presence of a sin stock premium has previously been debated; some studies found abnormal returns, while others linked the outperformance to traditional risk factors. To assess whether a sin premium exists in modern markets, I run a number of time-series regressions including the Fama-French models using data from 2000 to 2023. My results confirm a sin stock premium. When comparing US and European sin stocks, the former exhibit a noticeably higher premium. This is consistent with other research that found variations in market dynamics and investor behaviour by geography. Furthermore, I investigate the industry-level performance of sin stocks. Although the size of the sin stock premium varies, the results demonstrate continuous outperformance in each of the three industries. This analysis supports the hypothesis that sin stocks provide abnormal returns that are not entirely explained by conventional risk factors.
Date of Award | 22 Oct 2024 |
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Original language | English |
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Awarding Institution | - Universidade Católica Portuguesa
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Supervisor | Zoe Venter (Supervisor) |
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- Sin stocks
- Excess returns
- Market inefficiencies
- Investor behavior
- Asset pricing
- Fama-French models
- Time series regressions
Exploring the sin stock premium: a comparative analysis across regions and industries
Strüwe, J. (Student). 22 Oct 2024
Student thesis: Master's Thesis