Abstract
In <b>Is It Good to Sin When Times Are Bad? <i>An Investigation of the Defensive Nature of Sin Stocks</i></b> from the October 2020 issue of <i>The Journal of Investing</i>, author <b>Greg Richey</b> (of the <b>University of California at Riverside</b>) examines a variety of so-called sin industries, individually and altogether, to evaluate their resistance to downside risk as compared with the S&P 500 Index. Using an EGARCH model, Richey is able to show that negative market shocks, or “bad news events,” have a less negative impact on sin stock returns than do positive market shocks, or “good news events.” Using the VIX (also known as the <i>fear index</i>) for stock market volatility, he also indicates that VIX increases lead to delayed increases in anticipated volatilities for a mixed portfolio of various sin stocks. Overall, this makes sin stocks seem like a wise defensive choice for resisting negative shocks. <b>TOPICS:</b>Portfolio theory, portfolio construction, ESG investing
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