Journal
JOURNAL OF FINANCIAL AND QUANTITATIVE ANALYSIS
Volume 52, Issue 1, Pages 365-399Publisher
CAMBRIDGE UNIV PRESS
DOI: 10.1017/S0022109016000910
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- Michael Lee-Chin & Family Institute for Strategic Business Studies
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We model the pricing implications of screens adopted by socially responsible investors. The model reproduces the empirically observed abnormal return to sin stock and implies a premium for systematic investor boycott risk that affects targeted as well as nontargeted firms. The investor boycott premium is not displaced by litigation risk, measures of neglect effect, illiquidity, industry momentum, or concentration. The investor boycott risk factor is useful in explaining mean returns across industries, and its premium varies with the relative wealth of socially responsible investors and the business cycle.
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