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Does It Pay To Be Good? An Analysis Of Vice And Virtue Stock Performance In The Eurozone

Author

Listed:
  • Toni Vide

    (University of Warsaw, Faculty of Management, Poland)

Abstract

This paper provides a performance analysis of vice and virtue stocks in the Eurozone for the period between January 2005 and December 2014. In order to do so, a vice index is created consisting out of listed Eurozone companies, operating in selected vice industries and is subsequently matched with a corresponding virtue index, which for the purpose of this analysis is represented by the DJSI Eurzone. The tools used to conduct the performance evaluation are the Sharpe ratio, the Capital asset pricing model and the Carhart’s four-factor model. The analysis indicates, no consistent out- or under- performance of one or the other index, yet the realized performance over the whole period favours the vice index. Consequently one can conclude, that from a statistical point of view, there is no substantial advantage or disadvantage in being “good” when investing into stocks, as such it is a matter of investor preference, with the note that historical returns do favour vice stocks.

Suggested Citation

  • Toni Vide, 2016. "Does It Pay To Be Good? An Analysis Of Vice And Virtue Stock Performance In The Eurozone," Faculty of Management Working Paper Series 12016, University of Warsaw, Faculty of Management.
    • Handle: RePEc:sgm:fmuwwp:12016
    as

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    File URL: http://www.wz.uw.edu.pl/portaleFiles/5630-Faculty%20of%20M/WP/WPS12016Toni_Vide_kor_mar.pdf
    File Function: First version, 2016
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    References listed on IDEAS

    as
    1. Hong, Harrison & Kacperczyk, Marcin, 2009. "The price of sin: The effects of social norms on markets," Journal of Financial Economics, Elsevier, vol. 93(1), pages 15-36, July.
    2. repec:dau:papers:123456789/3028 is not listed on IDEAS
    3. Julie Salaber, 2007. "The Determinants of Sin Stock Returns: Evidence on the European Market," Working Papers halshs-00170219, HAL.
    4. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
    5. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Al Ayoubi, Khalil & Enjolras, Geoffroy, 2022. "Does disinvestment from fossil fuels reduce the financial performance of responsible sovereign wealth funds?," Journal of Multinational Financial Management, Elsevier, vol. 64(C).

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    More about this item

    Keywords

    CAPM; Eurozone; Four factor model; Sharpe ratio; Virtue stocks; Vice stocks;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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