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Keywords

CAPM; Eurozone; four-factor model; Sharpe ratio; virtue stocks; vice stocks

Abstract

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.

First Page

113

Last Page

125

Page Count

13

Received Date

University of Warsaw

Revised Date

7 March 2016

Accept Date

7 August 2016

Online Available Date

5 September 2016

DOI

10.7172/2353-6845.jbfe.2016.2.6

JEL Code

G11; G15; G17

Publisher

5 September 2016

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