Dynamic analysis of sin stocks and investor sentiment

Daniel Liston-Perez and Juan Pablo Gutierrez

International Journal of Managerial Finance, 2018, vol. 14, issue 5, 558-573

Abstract: Purpose - The purpose of this paper is to examine the temporal impact of individual and institutional investor sentiment on sin stock returns. Design/methodology/approach - The authors estimate vector autoregressive models (VARs) to assess the dynamic relationships amongst pure sin returns and both types of investor sentiment. The justification for estimating VARs is that it allows one to study the potential influence that shocks (i.e. innovations) in individual and institutional investor sentiment might have on pure sin returns over time. Sin stock returns are separated into a market-based and pure sin component. Additionally, the authors split both measures of investor sentiment into rational- and irrational-based components. Findings - This study finds that shocks to both individual and institutional rational-based sentiment positively influence pure sin returns for up to four months. However, irrational-based shocks have a positive, weaker and insignificant effect on pure sin returns. In addition, the results for the pure sin portfolio are compared to the S&P 500 and a comparables portfolio. The results show that sin stocks are less responsive than the S&P and the comparables portfolio to shocks in investor sentiment. Originality/value - This study addresses some of the limitations found in the only prior study of sin stocks and investor sentiment (Perez Liston, 2016). Specially, this study investigates the link between sin stocks and sentiment in a dynamic context and also focuses the analysis on pure sin returns.

Keywords: Sin stocks; Investor sentiment; VAR (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:ijmfpp:ijmf-01-2018-0001

DOI: 10.1108/IJMF-01-2018-0001

Access Statistics for this article

International Journal of Managerial Finance is currently edited by Dr Alfred Yawson

More articles in International Journal of Managerial Finance from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().