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Review of Quantitative Finance and Accounting

Erschienen in:

25.10.2023

The risk of SIN or socially irresponsible stocks

verfasst von: Alireza Rezaeian, Marie Racine

Erschienen in: Review of Quantitative Finance and Accounting | Ausgabe 2/2024

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Abstract

We demonstrate that the current practice of assuming SIN stocks are riskier than non-SIN stocks is misleading for SIN, or socially irresponsible, investments in alcohol, tobacco and gambling securities. Using annual North American data from 1980 to 2017, we investigate the risk of SIN stocks relative to that of a curated sample of non-SIN firms with similar characteristics and carefully matched using propensity score methodology. Our results show, with the lone exception of idiosyncratic risk of gambling stocks, it is hard to find a category in which the risk of SIN stocks is significantly greater than that of their matched non-SIN counterparts. Further, we find that risk is changing over time, is SIN category dependent and the ability of Corporate Social Responsibility to mitigate risk is also category sensitive.

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Financial companies and utilities are represented with SIC codes 6000–6799 and 4800–4999, respectively.

These are the formulas used by SAS software to measure sample skewness and kurtosis.

This test assumes the observations are independent. As a robustness check, we regressed each risk measure on a constant with Newey-West (1987) HAC standard errors for each SIN and non-SIN group and used the estimated constant as the estimated mean. We conducted t-test on the difference of these estimated means between the SIN categories versus the non-SIN samples. The results are like the ones based on the descriptive statistics measures in Table 5 and the differences are significant at 1%.

We assume that heterogeneity across units is not an issue as we control for SIN versus non-SIN using industry dummies and a broad set of controls.

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Titel: The risk of SIN or socially irresponsible stocks
verfasst von: Alireza Rezaeian
Marie Racine
Publikationsdatum: 25.10.2023
Verlag: Springer US
Erschienen in: Review of Quantitative Finance and Accounting / Ausgabe 2/2024
Print ISSN: 0924-865X
Elektronische ISSN: 1573-7179
DOI: https://doi.org/10.1007/s11156-023-01220-w

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