Investors Can Be Ethical and Still Beat the Market, Study Says


bloomberg.com |September 11, 2017,

Bloomberg News

Ethical fund managers don’t have to be envious of the market-beating returns of so-called sin stocks. They should be able to match them without dabbling in vice, according to a study in the Fall edition of the Journal of Portfolio Management.

The study debunks the popular theory that shares in the alcohol, tobacco, gaming, and weapons industries outperform because investors shun them, enabling those with fewer moral scruples to earn a “reputation risk premium.”

In fact any outperformance is a factor of the profitability of companies in the “sin” industries and the extent of their investments, the authors found. Investors can emulate those returns by looking for similar qualities in more straight-laced business sectors, they said.

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