IDEAS home Printed from https://ideas.repec.org/p/frz/wpaper/wp2018_05.rdf.html

Pricing Sin Stocks: Ethical Preference vs. Risk Aversion

Author

Listed:
  • Giuliano Curatola
  • Stefano Colonnello
  • Alessandro Gioffré

Abstract

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.

Suggested Citation

  • Giuliano Curatola & Stefano Colonnello & Alessandro Gioffré, 2018. "Pricing Sin Stocks: Ethical Preference vs. Risk Aversion," Working Papers - Economics wp2018_05.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    • Handle: RePEc:frz:wpaper:wp2018_05.rdf
    as

    Download full text from publisher

    File URL: https://www.disei.unifi.it/upload/sub/pubblicazioni/repec/pdf/wp05_2018.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. is not listed on IDEAS
    2. Okimoto, Tatsuyoshi & Takaoka, Sumiko, 2024. "Credit default swaps and corporate carbon emissions in Japan," Energy Economics, Elsevier, vol. 133(C).
    3. Sébastien Duchêne & Adrien Nguyen-Huu & Dimitri Dubois & Marc Willinger, 2021. "Why finance professionals hold green and brown assets? A lab-in-the-field experiment [Pourquoi investir dans le vert et le brun ? Une expérience sur des professionnels de la finance]," Working Papers hal-03285376, HAL.
    4. Tatsuyoshi Okimoto & Sumiko Takaoka, 2024. "Sustainability and Credit Spreads in Japan," Springer Books, in: Sumiko Takaoka (ed.), Environmental Technology Innovation and ESG Investment, pages 11-38, Springer.
    5. Karim, Sitara & Naeem, Muhammad Abubakr & Lucey, Brian M., 2022. "Do ethics outpace sins?," Finance Research Letters, Elsevier, vol. 47(PB).
    6. Adrian R. Fleissig, 2020. "Impact of Casino Gambling and Lotteries on Demand for Other ‘Sin’ Goods," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 48(3), pages 327-338, September.
    7. Tatsuyoshi OKIMOTO & Sumiko TAKAOKA, 2022. "Credit Default Swaps and Corporate Carbon Emissions in Japan," Discussion papers 22098, Research Institute of Economy, Trade and Industry (RIETI).
    8. Imane El Ouadghiri & Mathieu Gomes & Jonathan Peillex & Guillaume Pijourlet, 2022. "Investor Attention to the Fossil Fuel Divestment Movement and Stock Returns," Post-Print hal-03549713, HAL.
    9. Florian H. Schneider & Fanny Brun & Roberto A. Weber, 2020. "Sorting and wage premiums in immoral work," ECON - Working Papers 353, Department of Economics - University of Zurich, revised May 2024.
    10. Meehan, David & Corbet, Shaen, 2025. "Comparing the resilience of socially responsible and SIN investment during the COVID-19 pandemic," Research in International Business and Finance, Elsevier, vol. 73(PA).

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:frz:wpaper:wp2018_05.rdf. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Giorgio Ricchiuti (email available below). General contact details of provider: https://edirc.repec.org/data/defirit.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.