Pricing sin stocks: Ethical preference vs. risk aversion

Arbeitspapier

We develop a model that reproduces the average return and volatility spread between sin and non-sin stocks. Our investors do not necessarily boycott sin companies. Rather, they are open to invest in any company while trading off dividends against ethicalness. We show that when dividends and ethicalness are complementary goods and investors are sufficiently risk averse, the model predicts that the dividend share of sin companies exhibits a positive relation with the future return and volatility spreads. Our empirical analysis supports the model's predictions.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SAFE Working Paper ; No. 216

Classification and Topics

• Classification: Wirtschaft ; Exchange and Production Economies ; Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡ ; Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy: General (includes Measurement and Data) ; Asset Pricing; Trading Volume; Bond Interest Rates
• Subject: Asset Pricing ; General Equilibrium ; Sin Stocks

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Colonnello, Stefano ; Curatola, Giuliano ; Gioffré, Alessandro
• Event: Veröffentlichung
• (who): Goethe University Frankfurt, SAFE - Sustainable Architecture for Finance in Europe
• (where): Frankfurt a. M.
• (when): 2018

Further information

• DOI: doi:10.2139/ssrn.3206538
• Handle: http://hdl.handle.net/10419/180060
• URN: urn:nbn:de:hebis:30:3-466812
• Last update: 10.03.2025, 11:45 AM CET