PERCEPTIONS OF NON-PROFESSIONAL INVESTORS: THE CASE OF SIN STOCKS

Abstract

In an experimental setting, we test claims that investors are less likely to invest in certain industries due to non-financial preferences. Specifically, we test whether non-professional investors are more likely to divest themselves of an investment in a sin stock than a non-sin stock. We find that non-professional investors are significantly more likely to trade away sin stocks in a controlled setting. More specifically, we find that non-professional investors are more inclined to trade away investments in pornography related industries than in alcohol or tobacco related industries. We also find that donations to charity by these firms appear to have no significant impact on the divestment decisions of investors. Finally, we find no evidence that investors are aware of their own aversion to investment in sin stocks.