The cyclical dynamics of sin and stimulant stocks
Investors are increasingly avoiding sin stocks due to social and ethical considerations. In this study, we provide a novel perspective as to how investor sentiment, during various business cycles, affects the performance of sin stocks (stocks engaged in alcohol, tobacco and gaming) relative to that...
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| Format: | Final Year Project (FYP) |
| Language: | English |
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Nanyang Technological University
2022
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| Subjects: | |
| Online Access: | https://hdl.handle.net/10356/162591 |
| _version_ | 1824455076192714752 |
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| author | Mah, Caleb Wee Keat Tan, Tilden Jun Leong Wang, Qilong |
| author2 | Bao Te |
| author_facet | Bao Te Mah, Caleb Wee Keat Tan, Tilden Jun Leong Wang, Qilong |
| author_sort | Mah, Caleb Wee Keat |
| collection | NTU |
| description | Investors are increasingly avoiding sin stocks due to social and ethical considerations. In this study, we provide a novel perspective as to how investor sentiment, during various business cycles, affects the performance of sin stocks (stocks engaged in alcohol, tobacco and gaming) relative to that of stimulant stocks (stocks engaged in coffee and tea products). We hypothesize that sin stocks are counter- cyclical to the business cycles, while stimulant stocks are pro-cyclical. Based on data derived from the US stock market from February 1962 to August 2022, we constructed the sin and stimulant portfolios accordingly and performed a regression analysis using Carhart Four-Factor model as the base model and including a recessionary dummy variable, termed the cyclical model, to assess the cyclical dynamics of sin/stimulant stock performances. Furthermore, we conducted a correlational analysis between sin stocks, stimulant stocks, the overall stock market, and GDP growth, to assess their relationships during economic upturns and downturns. Consistent with one of our hypotheses, we found that sin stocks are counter- cyclical based on correlational analysis results, with the regression model yielding insignificant results. On the other hand, stimulant stocks are also counter-cyclical based on correlational analysis, contradicting our hypothesis. Limitations, as well as future recommendations, in terms of stock selection criteria, the definition of stimulant stocks, and the model employed were also discussed.
Key words: sin stocks, stimulant stocks, business cycle, investor sentiment |
| first_indexed | 2025-02-19T03:32:27Z |
| format | Final Year Project (FYP) |
| id | ntu-10356/162591 |
| institution | Nanyang Technological University |
| language | English |
| last_indexed | 2025-02-19T03:32:27Z |
| publishDate | 2022 |
| publisher | Nanyang Technological University |
| record_format | dspace |
| spelling | ntu-10356/1625912023-03-05T15:47:30Z The cyclical dynamics of sin and stimulant stocks Mah, Caleb Wee Keat Tan, Tilden Jun Leong Wang, Qilong Bao Te School of Social Sciences baote@ntu.edu.sg Social sciences::Economic theory::Money and banking Investors are increasingly avoiding sin stocks due to social and ethical considerations. In this study, we provide a novel perspective as to how investor sentiment, during various business cycles, affects the performance of sin stocks (stocks engaged in alcohol, tobacco and gaming) relative to that of stimulant stocks (stocks engaged in coffee and tea products). We hypothesize that sin stocks are counter- cyclical to the business cycles, while stimulant stocks are pro-cyclical. Based on data derived from the US stock market from February 1962 to August 2022, we constructed the sin and stimulant portfolios accordingly and performed a regression analysis using Carhart Four-Factor model as the base model and including a recessionary dummy variable, termed the cyclical model, to assess the cyclical dynamics of sin/stimulant stock performances. Furthermore, we conducted a correlational analysis between sin stocks, stimulant stocks, the overall stock market, and GDP growth, to assess their relationships during economic upturns and downturns. Consistent with one of our hypotheses, we found that sin stocks are counter- cyclical based on correlational analysis results, with the regression model yielding insignificant results. On the other hand, stimulant stocks are also counter-cyclical based on correlational analysis, contradicting our hypothesis. Limitations, as well as future recommendations, in terms of stock selection criteria, the definition of stimulant stocks, and the model employed were also discussed. Key words: sin stocks, stimulant stocks, business cycle, investor sentiment Bachelor of Arts in Economics 2022-11-01T00:46:53Z 2022-11-01T00:46:53Z 2022 Final Year Project (FYP) Mah, C. W. K., Tan, T. J. L. & Wang, Q. (2022). The cyclical dynamics of sin and stimulant stocks. Final Year Project (FYP), Nanyang Technological University, Singapore. https://hdl.handle.net/10356/162591 https://hdl.handle.net/10356/162591 en application/pdf application/pdf Nanyang Technological University |
| spellingShingle | Social sciences::Economic theory::Money and banking Mah, Caleb Wee Keat Tan, Tilden Jun Leong Wang, Qilong The cyclical dynamics of sin and stimulant stocks |
| title | The cyclical dynamics of sin and stimulant stocks |
| title_full | The cyclical dynamics of sin and stimulant stocks |
| title_fullStr | The cyclical dynamics of sin and stimulant stocks |
| title_full_unstemmed | The cyclical dynamics of sin and stimulant stocks |
| title_short | The cyclical dynamics of sin and stimulant stocks |
| title_sort | cyclical dynamics of sin and stimulant stocks |
| topic | Social sciences::Economic theory::Money and banking |
| url | https://hdl.handle.net/10356/162591 |
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