Vice as a haven?

: an empirical analysis of sin stock performance during economic downturns

Abstract

This paper examines whether European sin stock firms in alcohol, tobacco, gambling, and defense, deliver positive abnormal returns relative to broad market benchmarks during the last three recessions (2008, 2011, and 2019). Using a sample of 550 publicly listed companies, where 26 of them are sin stocks, across sixteen national indices and the STOXX Europe 600, I compute cumulative abnormal returns over two event windows [–10,10] and [–30,10], days relative to my non-sin sample. Under CAPM, sin stocks show no statistically significant outperformance in any recession or pooled window. In contrast, the richer Fama-French Five-Factor Model uncovers a robust sin penalty. Non-sin firms outperform sin peers by 2.6 percentage points in the three-week window and 5.8 points in the six-week window, with the penalty roughly doubling as the window lengthens. These findings contradict prior evidence of a sin stock premium and suggest that sin stocks in Europe are not recession-proof.

Date of Award	3 Jul 2025
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Zoe Venter (Supervisor)