| Summary: | This paper provides a performance analysis of vice and virtue stocks in the Eurozone for the
period between January 2005 and December 2014. In order to do so, a vice index consisting
of listed Eurozone companies operating in selected vice industries is created and subsequently
matched with a corresponding virtue index, which for the purpose of this analysis is represented
by the DJSI Eurozone. The tools used to conduct the performance evaluation are the Sharpe
ratio, the capital asset pricing model and the Carhart four-factor model. The analysis indicates
no consistent outperformance or underperformance of one or the other index, yet the realised
performance over the whole period favours the vice index. Consequently, it can be concluded
that from a statistical point of view, there is no substantial advantage or disadvantage in being
“good” when investing into stocks, as such it is a matter of investor preference, with the note that
historical returns do favour vice stocks.
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