Pricing Sin Stocks: Ethical Preference vs. Risk Aversion
European Economic Review,
We develop an ethical preference-based model that reproduces the average return and volatility spread between sin and non-sin stocks. Our investors do not necessarily boycott sin companies. Rather, they are open to invest in any company while trading off dividends against ethicalness. When dividends and ethicalness are complementary goods and investors are sufficiently risk averse, the model predicts that the dividend share of sin companies exhibits a positive relation with the future return and volatility spreads. An empirical analysis supports the model’s predictions. Taken together, our results point to the importance of ethical preferences for investors’ portfolio choices and asset prices.
IWH Alumni The IWH would like to stay in contact with its former employees. We...
Launch of IWH Bankruptcy Update From now on, the IWH provides a monthly update on corporate bankruptcy in Germany. It is...
At a Glance
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Demographic Change Dossier ...
The Income Elasticity of Mortgage Loan Demand
Financial Markets, Institutions & Instruments,
Special Issue: 2016 Portsmouth – Fordham Conferenc
One explanation for the emergence of the housing market bubble and the subprime crisis is that increases in individuals’ income led to higher increases in the amount of mortgage loans demanded, especially for the middle class. This hypothesis translates to an increase in the income elasticity of mortgage loan demand before 2007. Using applicant‐level data, we test this hypothesis and find that the income elasticity of mortgage loan demand in fact declines in the years before 2007, especially for the mid‐ and lower‐middle income groups. Our finding implies that increases in house prices were not matched by increases in loan applicants’ income.
IWH FDI Micro Database
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East Germany Rearguard Only investments in education will lead to a further catch-up ...