Is alcohol still considered a sin stock?

: a comparative analysis with sin stocks and shariah-compliant stocks

Abstract

Socially responsible investing (SRI) often excludes sin industries such as Alcohol. However, trends such as ESG adoption and Alcohol-free products challenge this classification. This thesis evaluates Alcohol's status as a sin stock by comparing its financial performance to other sin industries (Gambling and Tobacco) and the Shariah World Index, an SRI benchmark, using data from 200432023. Alcohol showed no significant link to Gambling stocks but displayed a negative correlation between its leverage and Tobacco returns, indicating shared financial risks. Periods of convergence between Alcohol and Shariah-compliant stock returns were also observed, particularly during phases of economic recovery and market volatility. Key factors influencing return differentials included Alcohol’s Market Activity, Profitability, Leverage, and Firm Size. Despite advancements in ESG, results show that Alcohol remains classified as a sin stock, reflecting persistent perceptions of its controversial nature. This underscores the nuanced relationship between evolving industry practices and ethical investment standards.

Date of Award	31 Jan 2025
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Zoe Venter (Supervisor)