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Pricing sin stocks: Ethical preference vs. risk aversion

Stefano Colonnello, Giuliano Curatola and Alessandro Gioffré

No 20/2017, IWH Discussion Papers from Halle Institute for Economic Research (IWH)

Abstract: We develop a model that reproduces the return and volatility spread between sin and non-sin stocks, where investors trade off dividends with the ethical assessment of companies. We relax the assumption of boycott behaviour and investigate the role played by the dividend share of sin stocks on their return and volatility spread relative to non-sin stocks. We empirically show that the dividend share predicts a positive return and volatility spread. This pattern is reproduced by our model when dividends and ethicalness are complementary goods and investors are sufficiently risk averse.

Keywords: asset pricing; general equilibrium; sin stocks (search for similar items in EconPapers)
JEL-codes: D51 D91 E20 G12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-upt
Date: 2017
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Related works:
Working Paper: Pricing Sin Stocks: Ethical Preference vs. Risk Aversion (2018) Downloads
Working Paper: Pricing sin stocks: Ethical preference vs. risk aversion (2018) Downloads
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