Sin stock returns on the European market: A study on traditional sin and new sin industries

Abstract

In this thesis, I study sin stocks on the European market over the period 2005-2020. Traditionally, sin stocks are defined as publicly traded companies involved in the sectors of alcohol, tobacco, gambling, and defense. In addition to traditional sin stocks, I examine new sin stocks, which are publicly traded stocks involved in oil and gas, metals and mining, uranium, and coal. The results suggest that traditional sin stocks have excess returns in some periods and are less held by norm-constrained investors. The new sin stocks are found to have decreasing returns over the sample period and are undervalued but to be more held by norm-constrained investors. Investors in sin stocks are mainly investment managers, corporations, and individuals. This study suggests that social norms will differ between countries and over time, which will affect what is considered sinful. The implications of these results should be considered when investing in sin stocks on the European market.