Advanced Search
MyIDEAS: Login to save this article or follow this journal

Religion and returns in Europe

Contents:

Author Info

  • Salaber, Julie
Registered author(s):

    Abstract

    Drawing on social identity and social impact theory, this paper is the first to investigate the impact of religious preferences on share prices and expected returns at the country level. Using data from 12 European countries, our findings suggest that religion has a significant effect on the share price of companies whose activities are considered unethical, i.e., tobacco manufacturers and alcohol producers. The share price of these companies (called sin stocks) is depressed when they are located in a predominantly Protestant environment (relative to a Catholic environment). With investors in Protestant countries being more sin averse than in Catholic countries, they insist upon higher expected returns on sin stocks. Conversely, religious preferences do not have the same impact on the performance of other companies, e.g. socially responsible companies. Our results are robust to various methodologies and controlling for several firm-specific, industry-specific and country-specific characteristics.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.sciencedirect.com/science/article/pii/S0176268013000578
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by Elsevier in its journal European Journal of Political Economy.

    Volume (Year): 32 (2013)
    Issue (Month): C ()
    Pages: 149-160

    as in new window
    Handle: RePEc:eee:poleco:v:32:y:2013:i:c:p:149-160

    Contact details of provider:
    Web page: http://www.elsevier.com/locate/inca/505544

    Related research

    Keywords: Financial performance; Religious preferences; Sin stock premium; Social identity; Social responsibility;

    Find related papers by JEL classification:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Luc Renneboog & Christophe Spaenjers, 2012. "Religion, economic attitudes, and household finance," Oxford Economic Papers, Oxford University Press, vol. 64(1), pages 103-127, January.
    2. Matthias Helble, 2007. "Is God Good for Trade?," Kyklos, Wiley Blackwell, Wiley Blackwell, vol. 60(3), pages 385-413, 08.
    3. Fama, Eugene F & MacBeth, James D, 1973. "Risk, Return, and Equilibrium: Empirical Tests," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 81(3), pages 607-36, May-June.
    4. Lars P. Feld & Stefan Voigt, 2003. "Economic Growth and Judicial Independence: Cross Country Evidence Using a New Set of Indicators," CESifo Working Paper Series 906, CESifo Group Munich.
    5. Coates, Dennis & Heckelman, Jac C. & Wilson, Bonnie, 2010. "The political economy of investment: Sclerotic effects from interest groups," European Journal of Political Economy, Elsevier, Elsevier, vol. 26(2), pages 208-221, June.
    6. Mark Grinblatt, 2001. "How Distance, Language, and Culture Influence Stockholdings and Trades," Journal of Finance, American Finance Association, American Finance Association, vol. 56(3), pages 1053-1073, 06.
    7. Smith, Ian & Sawkins, John W & Seaman, Paul T, 1998. "The Economics of Religious Participation: A Cross-Country Study," Kyklos, Wiley Blackwell, Wiley Blackwell, vol. 51(1), pages 25-43.
    8. Cao, Henry & Han, Bing & Hirshleifer, David & Zhang, Harold, 2007. "Fear of the Unknown: Familiarity and Economic Decisions," MPRA Paper 6512, University Library of Munich, Germany.
    9. RAFAEL LaPORTA & FLORENCIO LOPEZ-de-SILANES & ANDREI SHLEIFER & ROBERT W. VISHNY, . "Legal Determinants of External Finance,"," CRSP working papers, Center for Research in Security Prices, Graduate School of Business, University of Chicago 324, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
    10. Fama, Eugene F. & French, Kenneth R., 2007. "Disagreement, tastes, and asset prices," Journal of Financial Economics, Elsevier, Elsevier, vol. 83(3), pages 667-689, March.
    11. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, American Finance Association, vol. 7(1), pages 77-91, 03.
    12. Hong, Harrison & Kacperczyk, Marcin, 2009. "The price of sin: The effects of social norms on markets," Journal of Financial Economics, Elsevier, Elsevier, vol. 93(1), pages 15-36, July.
    13. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, American Finance Association, vol. 19(3), pages 425-442, 09.
    14. Rene M. Stulz & Rohan Williamson, 2001. "Culture, Openness, and Finance," NBER Working Papers 8222, National Bureau of Economic Research, Inc.
    15. Tesar, Linda L. & Werner, Ingrid M., 1995. "Home bias and high turnover," Journal of International Money and Finance, Elsevier, Elsevier, vol. 14(4), pages 467-492, August.
    16. Merton, Robert C., 1987. "A simple model of capital market equilibrium with incomplete information," Working papers, Massachusetts Institute of Technology (MIT), Sloan School of Management 1869-87., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    17. Bianconi, Marcelo & Tan, Liang, 2010. "Cross-listing premium in the US and the UK destination," International Review of Economics & Finance, Elsevier, Elsevier, vol. 19(2), pages 244-259, April.
    18. King, Michael R. & Segal, Dan, 2008. "Market segmentation and equity valuation: Comparing Canada and the United States," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 18(3), pages 245-258, July.
    19. Benito Arruñada, 2004. "Protestants and Catholics: Similar work ethic, different social ethic," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 743, Department of Economics and Business, Universitat Pompeu Fabra, revised Sep 2010.
    20. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, Elsevier, vol. 33(1), pages 3-56, February.
    21. Ozgur S. Ince & R. Burt Porter, 2006. "INDIVIDUAL EQUITY RETURN DATA FROM THOMSON DATASTREAM: HANDLE WITH CARE!," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 29(4), pages 463-479.
    22. Jegadeesh, Narasimhan & Titman, Sheridan, 1995. "Overreaction, Delayed Reaction, and Contrarian Profits," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 8(4), pages 973-93.
    23. Kumar, Alok & Page, Jeremy K. & Spalt, Oliver G., 2011. "Religious beliefs, gambling attitudes, and financial market outcomes," Journal of Financial Economics, Elsevier, Elsevier, vol. 102(3), pages 671-708.
    24. Dopke, Jorg & Pierdzioch, Christian, 2006. "Politics and the stock market: Evidence from Germany," European Journal of Political Economy, Elsevier, Elsevier, vol. 22(4), pages 925-943, December.
    25. Hilary, Gilles & Hui, Kai Wai, 2009. "Does religion matter in corporate decision making in America?," Journal of Financial Economics, Elsevier, Elsevier, vol. 93(3), pages 455-473, September.
    26. Shujing Li & Hamid Faruqee & Isabel K. Yan, 2004. "The Determinants of International Portfolio Holdings and Home Bias," IMF Working Papers 04/34, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:eee:poleco:v:32:y:2013:i:c:p:149-160. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.