Vice versus virtue investing around the world

摘要

This paper assumes the role of advocatus diaboli by testing whether an investment in sin stocks can financially outperform an investment in socially responsible stocks. We create a set of global, regional, and domestic portfolios consisting of a large number of stocks belonging to what could be labeled as a sextet of sin: adult entertainment, alcohol, gambling, nuclear power, tobacco, and weapons. We assess the performance of sin stocks against well-known benchmarks, and rerun the identical assessment for socially responsible stocks. We find no compelling evidence that sin stocks, or socially responsible stocks outperform or underperform, and establish this result in several ways. Consistent with this finding, a hedge portfolio long in sin stocks and short in socially responsible stocks does not outperform the market, either. However, sin stocks are substantially tilted towards value, bear less market risk with an average beta below one, and are prone to momentum relative to socially responsible stocks.