The Impact Of Sin Stock Exclusion On Portfolio Performance.
“‘As about 10% of the market can be classified as sin, this would imply an additional 0.10% return loss if sin stocks are excluded. Combined with the 0.27% estimated loss due to the adverse effect on factor exposures … this brings the total loss in expected return to 0.37% per annum.
Although this might seem small, a pension fund which generates 0.37% lower returns on its equity portfolio than peers may end up providing 5% lower pensions in the long run.’ That is not an insignificant loss.”
[COMMENTARY] This article reports on a study saying that excluding 11 particular industries in a portfolio results in a 0.37% annual loss in returns. I’m sure many will debate the methodology and conclusions of this study.
The Impact Of Sin Stock Exclusion On Portfolio Performance, by Larry Swedroe, May 19, 2021, Seeking Alpha, USA.