Does the corporate bond market overvalue bonds of sin companies?

Frank Fabozzi (), Asjeet S. Lamba, Takeshi Nishikawa, Ramesh Rao () and K.C. Ma

Finance Research Letters, 2019, vol. 28, issue C, 165-170

Abstract: Several studies have investigated whether there is undervaluation of sin stocks. This undervaluation, it is argued, results in superior sin stock returns compared to non-sin stock returns. Empirical results are mixed. In contrast to the empirical work on sin stock returns, there has been no empirical evidence on sin company bond returns. We investigate the relative performance of bonds of sin companies compared to those of non-sin companies. We find that sin bonds tend to be overvalued, resulting in sin bonds underperforming their non-sin counterparts. We provide possible explanations for this finding for sin bonds in contrast to sin stocks.

Keywords: Sin bond returns; Sin stock returns; Social values; Asset pricing (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:28:y:2019:i:c:p:165-170

DOI: 10.1016/j.frl.2018.04.018

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