Press Releases

New Study Finds That Investors Gain 2.5% a Year by Investing in “Sin” Stocks

NEW YORK--In their paper, “The Price of Sin: The Effects of Social Norms on Markets,” NYU Stern Assistant Professor of Finance Marcin Kacperczyk and his co-author, Harrison Hong from Princeton University, examine the performance of stocks from 1926-2006. They find that investors gain 2.5% higher returns every year (on a risk-adjusted basis) by investing in “sin” stocks – publicly traded companies involved in the so-called industry “Triumvirate of Sin”: alcohol, tobacco, and gaming – versus investing in stocks with comparable characteristics, such as beverage, food, and entertainment companies, respectively.

The findings also show that there is a societal norm against funding operations that promote vice and that some institutional investors, such as pension plans that are subject to norms, hold less of these stocks and, as a result, pay the financial cost of abstaining. In addition, “sin” stocks receive less analyst coverage than stocks with comparable characteristics. While “sin” stocks are neglected by norm-constrained investors and face greater litigation risk due to social norms, they have higher expected returns than otherwise comparable stocks.

“This research shows that social norms are important for economic outcomes and that they affect markets, including investment decisions, stock prices, and returns,” said Professor Kacperczyk.

This paper was recently accepted for publication at the Journal of Financial Economics. To read the full paper, visit:

Professor Kacperczyk’s research focuses on institutional investors, empirical asset pricing, socially responsible investing, and behavioral finance.

To speak with Professor Marcin Kacperczyk, please contact him directly at 734-883-6264,, or contact Jenny Owen in NYU Stern’s Office of Public Affairs at 212-998-0561,

October 21, 2009: