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Title: The cyclical dynamics of sin and stimulant stocks
Authors: Mah, Caleb Wee Keat
Tan, Tilden Jun Leong
Wang, Qilong
Keywords: Social sciences::Economic theory::Money and banking
Issue Date: 2022
Publisher: Nanyang Technological University
Source: Mah, C. W. K., Tan, T. J. L. & Wang, Q. (2022). The cyclical dynamics of sin and stimulant stocks. Final Year Project (FYP), Nanyang Technological University, Singapore.
Abstract: Investors are increasingly avoiding sin stocks due to social and ethical considerations. In this study, we provide a novel perspective as to how investor sentiment, during various business cycles, affects the performance of sin stocks (stocks engaged in alcohol, tobacco and gaming) relative to that of stimulant stocks (stocks engaged in coffee and tea products). We hypothesize that sin stocks are counter- cyclical to the business cycles, while stimulant stocks are pro-cyclical. Based on data derived from the US stock market from February 1962 to August 2022, we constructed the sin and stimulant portfolios accordingly and performed a regression analysis using Carhart Four-Factor model as the base model and including a recessionary dummy variable, termed the cyclical model, to assess the cyclical dynamics of sin/stimulant stock performances. Furthermore, we conducted a correlational analysis between sin stocks, stimulant stocks, the overall stock market, and GDP growth, to assess their relationships during economic upturns and downturns. Consistent with one of our hypotheses, we found that sin stocks are counter- cyclical based on correlational analysis results, with the regression model yielding insignificant results. On the other hand, stimulant stocks are also counter-cyclical based on correlational analysis, contradicting our hypothesis. Limitations, as well as future recommendations, in terms of stock selection criteria, the definition of stimulant stocks, and the model employed were also discussed. Key words: sin stocks, stimulant stocks, business cycle, investor sentiment
Schools: School of Social Sciences 
Fulltext Permission: restricted
Fulltext Availability: With Fulltext
Appears in Collections:SSS Student Reports (FYP/IA/PA/PI)

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