Would You Rather Laugh with the Sinners than Cry with the Saints?

Sammanfattning: This thesis provides new evidence on social norms' impact on capital markets through the lens of the Swedish stock market and sheds new light on ownership structure, analyst coverage, valuation and financing decisions of vice companies - companies involved in sinful industries, including gambling, tobacco and alcohol - as well as its implication for stock returns. We show that sin stocks are neglected by institutions and have lower sell-side analyst coverage, thus sin stocks indicatively face less liquid equity markets than comparable stocks. Consistent with previous research, we find that sin stocks outperform comparable companies by generating abnormal returns of approximately 15.5% per year. Indicatively, the perception of what constitutes a sin has changed over time and should probably be widened to include fossil fuel and defense as we find that the outperformance is robust to the inclusion of these industries.