Abstract
This study examines the behavior of cannabis stock on the Toronto Stock Exchange and why investors are interested in cannabis stock. The theory of heterogeneous beliefs, bounded rationality theory and the theory of addiction grounded the study. We employed basic descriptive statistics and the Kruskal-Wallis test including an in-depth interview of investors using convenience sampling methods. The study findings showed that cannabis stocks exhibit a higher-level of risk volatility when compared to speculative and growth stocks on the Toronto Stock Exchange within the period under investigation. The descriptive statistics result suggest potential diversification benefits between cannabis stocks and growth stocks as both stocks classifications are likely to respond to macroeconomic shocks differently. Other findings show that cannabis stocks share similar characteristics with other speculative stocks but also possess unique features. Finally, investors are interested in cannabis stocks because of its potential for future strong earnings on the platform of the theory of addiction as discussed in the study.
Highlights
In 2001, Canada became the first country to legalize Cannabis for medical purposes
Against the foregoing discussion, this study empirically examines the behavior of cannabis stocks on the Toronto Stock Exchange (TSX), and in addition explores why investors are interested in these stocks
On the basis of the forgoing discussion, this study examines the behavior of cannabis stocks on the Toronto Stock Exchange (TSX)
Summary
In 2001, Canada became the first country to legalize Cannabis for medical purposes. This was passed into law through the Marijuana Medical Access Regulations (MMAR) Acts (Greenline POS, 2019). The passing of this bill into law ushered in a plethora of pharmaceutical firms interested in developing medications derived primarily from Cannabis compound. Scientists overtime based on their understanding of how the human brain responds to Cannabis have developed medications which are derivatives of cannabis compounds to alleviate human sufferings by mitigating the effects of certain ailments. For instance medical cannabis have been developed for the treatment of neuropathic pain, spasticity in patients with multiple sclerosis, analgesic treatment of adult with cancer, treatment of nausea, appetite stimulant for patient with HIV, regaining memory loss, treatment of traumatic brain injury etc. (Medicalmarijuana.ca, 2019)
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