A Comparative Study of the Returns of Quoted Sin and Non Sin Stocks at the Nairobi Securities Exchange
Keywords:non-sin stocks, sin stocks, Local Government
Purpose: The purpose of the study was to compare returns of quoted sin and non-sin stocks at the Nairobi Securities Exchange. The major objective of the study was to establish whether stock returns of sin stocks outperform non sin stocks.
Methodology: The study used explanatory research design with the population consisting of all firms listed in the NSE. The sample of the study consisted of the top 20 NSE firms. The study grouped 18 firms into the non-sin stock category and another 2 firms (BAT ad EABL) into the sin stock category. Secondary data sources were used in gathering data for analysis which was done using the Statistical Package for Social Sciences (SPSS version 20) to generate the descriptive statistics and also to generate inferential results.
Results: The study found out that sin stocks have higher capital gains, high expected return and dividends than in non-sin stocks
Unique contribution to theory, practice and policy: The study recommended that Sin stocks have higher expected returns than comparable stocks; however, neglected they are by norm constrained investors. Therefore, investors should split their investment in sin stock and non-sin stocks.
Adler, T., and M. Kritzman (2008). The Cost of Socially Responsible Investing. Journal of Portfolio Management (Fall). 35, (1): 52-56
Ahrens, D. 2004. Investing in Vice. St Martin’s Press, New York.
Aydogan, K., and Booth. G. (2003). Calendar anomalies in the Turkish foreign exchange markets, AppliedFinancial Economics, 13, 353-360.
Aziza, M.M. (2011). An Evaluation of the Perfomance of Islamically Screened Portfolios At The Nairobi Stock Exchange. Retrieved fromhttp://erepository.uonbi.ac.ke/bitstream/handle/123456789/10152/aibuma%202012-submission%20208.pdf?sequence=1
Berman, D. 2002. Why Sin is good: Tobacco, alcohol, and gaming stocks can add sizzle to your portfolio. Retrieved from http://www.moneysense.ca/investing/stocks_markets/article.jsp?content
Brown, P. and Mitchell, J. (2008). Culture and stock price clustering: Evidence from thePeoples’ Republic of China. Pacific-Basin Finance Journal, 16, 95-120.
Cambridge University Press. (2003). Sin Stocks.Cambridge Advanced Learner’s Dictionary. UK: Cambridge University Press.
CDSC.(2004). Legal and Regulatory Framework. Retrieved June, 2013, from Central Depository Clearing System: http://www.cdsckenya.com/legal-framework/legal-and-regulatory-framework/
Chandran, E. (2004). Research Methods: A Quantitative Approach with Illustrations from Christian Ministries.Nairobi: Daystar University.
CMA (2011). Establishment of the Capital Markets Authority. Retrieved June, 2013, from Capital Markets Authority :http://www.cma.or.ke/index.php?option=com_content&task view&id=16&Itemid=36
Cooper, D.R and Schindler, P.S (2006).Business Research Methods, 9th, edition. McGraw-Hill Publishing, Co. Ltd. New Delhi-India
Cross, F. 1973. The behavior of stock prices on Fridays and Mondays, Financial Analyst Journal, November-December. 67-69.
De Roon, F.A., Nijman, T.E., Werker, B.J.M., (2001). Testing for mean-variance spanning with short sales constraints and transaction costs: The case of emerging markets. Journal of Finance 56, 721-742.
Dukes, B. (2008). Personal Values and Stock Values: A Survey.Working paper, Texas Tech University
Engle, R. F. (1995). Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation. Econometrica. 50(4). 987-1008.
French, K. (1980). Stock returns and the weekend effect, Journal of Financial Economics, 8, 55-69.
French, K.R., Poterba, J.M., (1991). International diversification and international equity markets. American Economic Review 81, 222-226.
Gibbons, M., and P. Hess. (1981). Day of the week effects and asset returns, Journal of Business, 54, 579- 596.
Hong, H. and Kacperczyk, M. (2005). The price of sin: The effects of social norms on markets. Working Paper, Princeton University and University of British Columbia.
Hong, H. and Kacperczyk, M. (2007) The Price of Sin: The Effects of Social Norms on Markets. Working Paper.
Iraya,C & Musyoki, L.N (2013). Performance of Socially Screened Portfolio at the Nairobi Securities Exchange. International Journal of Humanities and Social Science 3-6
Jaffe, J., and R. Westerfield. (1985a). The week-end effect in common stock returns: The international evidence, Journal of Finance, 40, 433-454.
Kagunda P.K (2010). A Comparison Of Performance Between Unit Trusts And A Market Portfolio Of Shares At Nse. Unpublished MBA Project. University of Nairobi
Keim, D.B., and Stambaugh F. (1984). A further investigation of weekend effects in stock returns, Journal of Finance, 39, 819-840.
Kim I. and Venkatachalam M. (2006). Are Sin Stocks Paying the Price for their AccountingSins? Working Paper.
Kritzman, M., S. Myrgren, and Page S. (2008). The Cost of Being Good. Economics and Portfolio Strategy. The Journal of Portfolio Management Fall 2008, 35, 1: 52-5
Lakonishok, J., and Levi. M. (1982). Weekend effect in stock return: A note, Journal of Finance, 37, 883- 889.
Lee, R. (1998). What Is An Exchange? The Automation, Management, and Regulation of FinancialMarkets. New York: Oxford University Press Inc.
Mendelson M. &Robbins S. (1976).Investment Analysis and Security Markets.
Money Management. (2006). Weapons and dice, and all things vice 1 (June 1).
Mugenda, O. M. &Mugenda, A.G. (2003). Research Methods: Quantitative and Qualitative Approaches (2nd Ed) Nairobi: Acts.
Munn, P., & Drever, E. (2004). Using questionnaires in small-scale research: A beginner's guide. Glasgow, Scotland: Scottish Council for Research in Education.
Murigi B.W (2008). An Investigation Of The Effect Of Kenyan Elections In The Returns Of Stocks At The Nse. Unpublished MBA project. University of Nairobi
Ngacha, Z.W (2009). A Comparative Study on Performance Between Value & Growth Stocks At The NSE.Unpublished MBA Project. University of Nairobi
NSE.(2011). Regulatory Framework. Retrieved August 1st , 2011, from Nairobi Stock Exchange: http://www.nse.co.ke/regulatory-framework/category/42-nairobi-stock-exchange-nse.htmlportfolio.http://www.moneysense.ca/investing/stocks_markets/article.jsp?content=0021127 54845_3424.
Pudha E.O (2010). Factors Influencing Fund Manager’s Investment Decisions On Ordinary Shares At Nairobi Stock Exchange.Unpublished MBA Project. University of Nairobi
Rajab J.K (2009) .The Effect Of Ipos On The Performance Of Other Stocks At The Nse.Unpublished MBA Project. University of Nairobi
Rogalski, R.J. (1984). New findings regarding day of the week returns over trading and non-trading periods: A note, Journal of Finance, December, 1603-1614.
Ross S.A (1976). The Arbitrage Theory of Capital Asset Pricing. J. Econ. Theo. 13, 341-360.
Salaber, J. (2007). The determinants of sin stock returns: Evidence on the European market. Working Paper, Paris-Dauphine University.
Social Investment Forum (SIF). (2007). Report on responsible investing trends in United States. Downloaded on 5th June 2013 from http://www.socialinvest.org
Statman, M. (2007). Socially responsible investments. Working Paper, Santa Clara University.
Statman, M., K.L. Fisher, and Anginer D. (2008). Affect in a Behavioral Asset-Pricing Model.Financial Analysts Journal, 20–29.
Wang, L. (2010). Empirical Analysis of Macroeconomic Factors Affecting Stock Prices.Orient Academic Forum , 132-133.
Waringa, R. (2008). Factors Influencing Fund Manager’s Investment Decisions On Ordinary Shares At Nairobi Stock Exchange.Unpublished MBA Project. University of Nairobi
Waxler, C. (2004). Stocking Up on Sin. John Wiley & Sons, Inc., New Jersey.
Yamori, N., and Mourdoukow, P. (2003). Does the day-of the week effect in foreign currency markets disappear? Evidence from the Yen/Dollar market, International Financial Review 4, 447- 463.
How to Cite
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution (CC-BY) 4.0 License that allows others to share the work with an acknowledgment of the work’s authorship and initial publication in this journal.