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this explains it pretty well. https://www.aqr.com/Insights/Perspectives/Virtue-is-its-Own-Reward-Or-One-Mans-Ceiling-is-Another-Mans-Floor https://www.aqr.com

this explains it pretty well. https://www.aqr.com/Insights/Perspectives/Virtue-is-its-Own-Reward-Or-One-Mans-Ceiling-is-Another-Mans-Floor https://www.aqr.com/Insights/Perspectives/Virtue-is-its-Own-...

shkkmo 7y ago
It's a bit wordy, but the relevant argument is here: > everything still gets owned by someone. So, clearly the group without such qualms, call them the sinners, have to own more than they otherwise would of the sin stocks. How does a market get anyone, perhaps particularly a sinner, to own more of something? Well it pays them! In this case through a higher expected return on the segment in question.
- gowld 7y ago
  The article's loose language is confusing. The full analysis has 3 parties: virtuous boycottor investors, vicious (as in vice) investors, which the article incorrectly calls "sinner", and the evil corporation. The conclusion is that the virtuous boycottor investors' weapon is forcing the evil company to pay the vicious investors a premium return, until the corporation is bankrupt, and the vicious investors laugh all the way to the bank while the virtuous investors take pride that their financial sacrifice improved the world.
  - shkkmo 7y ago
    The specific question being answered was: > how will that give the non-morally-driven investors higher returns? Which is why I only quoted the section that applied directly. The argument doesn't say that "sinful" companies will be forced into bankruptcy, it goes more like this: 1) virtuous boycotting of a company means the stock has to offer higher returns to "sinful" investors so they buy more shares. 2) Higher returns mean that the bar for the expected return of "sinful" capital expenditures by companies will be higher and thus there were be fewer choices by companies to expend capital in "sinful" ways. I think the second stage of this argument is... weak and conditional. For a company like BP that offers significant dividends, a lower stock price directly correlates to a higher return without costing the company anything. There is only a downside if that company is selling stock to raise capital. Since BP has been buying back stock for years, it seems like this is actually a benefit to BP as well.

shkkmo 7y ago

It's a bit wordy, but the relevant argument is here: > everything still gets owned by someone. So, clearly the group without such qualms, call them the sinners, have to own more than they otherwise would of the sin stocks. How does a market get anyone, perhaps particularly a sinner, to own more of something? Well it pays them! In this case through a higher expected return on the segment in question.

gowld 7y ago
The article's loose language is confusing. The full analysis has 3 parties: virtuous boycottor investors, vicious (as in vice) investors, which the article incorrectly calls "sinner", and the evil corporation. The conclusion is that the virtuous boycottor investors' weapon is forcing the evil company to pay the vicious investors a premium return, until the corporation is bankrupt, and the vicious investors laugh all the way to the bank while the virtuous investors take pride that their financial sacrifice improved the world.
- shkkmo 7y ago
  The specific question being answered was: > how will that give the non-morally-driven investors higher returns? Which is why I only quoted the section that applied directly. The argument doesn't say that "sinful" companies will be forced into bankruptcy, it goes more like this: 1) virtuous boycotting of a company means the stock has to offer higher returns to "sinful" investors so they buy more shares. 2) Higher returns mean that the bar for the expected return of "sinful" capital expenditures by companies will be higher and thus there were be fewer choices by companies to expend capital in "sinful" ways. I think the second stage of this argument is... weak and conditional. For a company like BP that offers significant dividends, a lower stock price directly correlates to a higher return without costing the company anything. There is only a downside if that company is selling stock to raise capital. Since BP has been buying back stock for years, it seems like this is actually a benefit to BP as well.