Wise Investing: Analysis of the Recession-Proof Sin Stocks

This paper investigates whether the sin stocks under or over perform the SP500 for different investment periods, i.e. most of the time, and especially during the recession periods. A sin portfolio is constructed for the research purposes, VICEP. Using two conventional asset pricing model regressions, the characteristics of the VICEP are studied. Each model is estimated using the sample ranging from 1980 to 2008 as well as for the three recession periods (1991, 2001 and 2007 recessions). We analyzed the sin stocks on an industry basis to advice on the individual securities that have significant share in VICEP. We found that our portfolio of sin stocks is able to provide recession-proof returns to the investors. The majority of time, industry sub portfolios under sin stocks also provides superior results than the market. We present evidence that the risk-return characteristics of sin stocks are superior compared to the market as well as socially responsible stocks.