Does the sinner beat the saint? An empirical study of the Nordic stock market

Abstract

Abstract This research paper studies the interaction between monthly returns of sin stock portfolios, where the purpose is to get an understanding of what impact an exclusion of sin stocks can have on portfolio returns for Nordic stock investors. OLS (ordinary least squares) time-series regression models are used to execute this research, using data between 1990-2018. The latter part of the paper presents the executed OLS time-series regressions, comparing four different dependent variables. Two sin stock portfolios against a comparable sin stock portfolio and two sin stock portfolios against all other stocks in the sample. Additionally classic factors such as market, size, value, momentum and beta are included as control variables in the models. The OLS regression analyses indicate mixed results, since two of the dependent variables, SMC (Sin Minus Comparable) and SOMO (Sin Oil Minus Other), have alphas that are not significantly different from zero. Thereby it is hard to determine whether a sin stock anomaly is present or not. However, the dependent variables, SOMC (Sin Oil Minus Comparable) and SMO (Sin Minus Other) indicate that sin stock returns are significantly different from zero by 0.56% and 0.44% per month, respectively. This, on the other hand, supports the presence of a sin stock anomaly.