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Sin Stocks: An Analysis of the Sin Premium in the US, European, and Asia-Pacific Markets

Widmer, Tizian LU and Scholl, Tim LU (2023) NEKN02 20231
Department of Economics
Abstract
This thesis aims to explain the return of so-called sin stocks, which include businesses operating in the alcohol, tobacco, gambling, weapon, and oil & gas industries. Due to their negative public perception, these stocks are anticipated to yield a sin premium. This study analyses the potential variation of sin premiums across three different markets, specifically the US, European, and Asia-Pacific markets. By employing three different factor models introduced by Fama and French and Carhart, we analyze the presence of a sin premium across the three markets. Our findings indicate that there is no consistent sin premium; however, investors may realize an outperformance by selectively investing in specific industries within the European... (More)
This thesis aims to explain the return of so-called sin stocks, which include businesses operating in the alcohol, tobacco, gambling, weapon, and oil & gas industries. Due to their negative public perception, these stocks are anticipated to yield a sin premium. This study analyses the potential variation of sin premiums across three different markets, specifically the US, European, and Asia-Pacific markets. By employing three different factor models introduced by Fama and French and Carhart, we analyze the presence of a sin premium across the three markets. Our findings indicate that there is no consistent sin premium; however, investors may realize an outperformance by selectively investing in specific industries within the European (tobacco) and Asia-Pacific (alcohol and tobacco) markets. Furthermore, we investigate the behavior of sin stocks during both the financial crisis and the COVID-19 pandemic. Our analysis shows no discernible state-varying behavior in the US and European markets. Nonetheless, the Asia-Pacific market demonstrates an outperformance of alcohol stocks during the financial crisis and tobacco stocks during the COVID-19 crisis. (Less)
Please use this url to cite or link to this publication:
author
Widmer, Tizian LU and Scholl, Tim LU
supervisor
organization
course
NEKN02 20231
year
type
H1 - Master's Degree (One Year)
subject
keywords
Sin Stocks, Factor Models, USA, Europe, Asia-Pacific
language
English
id
9123459
date added to LUP
2023-11-24 08:58:37
date last changed
2023-11-24 08:58:37
@misc{9123459,
  abstract     = {{This thesis aims to explain the return of so-called sin stocks, which include businesses operating in the alcohol, tobacco, gambling, weapon, and oil & gas industries. Due to their negative public perception, these stocks are anticipated to yield a sin premium. This study analyses the potential variation of sin premiums across three different markets, specifically the US, European, and Asia-Pacific markets. By employing three different factor models introduced by Fama and French and Carhart, we analyze the presence of a sin premium across the three markets. Our findings indicate that there is no consistent sin premium; however, investors may realize an outperformance by selectively investing in specific industries within the European (tobacco) and Asia-Pacific (alcohol and tobacco) markets. Furthermore, we investigate the behavior of sin stocks during both the financial crisis and the COVID-19 pandemic. Our analysis shows no discernible state-varying behavior in the US and European markets. Nonetheless, the Asia-Pacific market demonstrates an outperformance of alcohol stocks during the financial crisis and tobacco stocks during the COVID-19 crisis.}},
  author       = {{Widmer, Tizian and Scholl, Tim}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Sin Stocks: An Analysis of the Sin Premium in the US, European, and Asia-Pacific Markets}},
  year         = {{2023}},
}