Henley Public Lecture: Dr Andreas Hoepner discusses the myth of outperforming “sin firms”

The lecture, titled “Investing in sin firms: is vice really nice?”, brought into question a paper published by Hong & Kacperczyk in 2009, which claimed that so called “sin firms” – business specialising in vice products like alcohol, tobacco and gambling – outperformed other firms, an idea that was relished by press at the time.

During the lecture, Hoepner addressed how the paper that he and co-author Hampus Adamsson produced “The Price of Sin Aversion” sought to first duplicate the research methods used by HK, and then amend and improve the methodology in order to try to assess if the results held water in a real world research setting.

“First we used the same method as Hong & Kacperczyk to test that we received the same results,” Andreas commented. “However, when using a financial data science approach rather than classic financial economics analysis, the moment we controlled in-sector size and value controls the outperformance of the sin stocks disappeared in almost every case.”

Hoepner finished off the lecture with an example of the practical uses of financial data science, using an example of the 2010 Germany-England world cup, demonstrating a graph that was able to use Twitter comments to plot supporters' “sentiment” towards each team during the match.

The lecture was held at Henley Business School’s ICMA Centre which specialises in undergraduate and postgraduate degrees in finance at University of Reading, and is home to an extensive trading simulation terminals supported by Bloomberg and Thomson Reuters.