Theses and Dissertations - UTB/UTPA

Date of Award


Document Type


Degree Name

Doctor of Philosophy (PhD)



First Advisor

Dr. Gökçe A. Soydemir

Second Advisor

Dr. Damian Damianov

Third Advisor

Dr. Hale Kaynak


This dissertation studies the impact of investor sentiment on a portfolio formed of sin stocks—publicly traded companies in the alcohol, tobacco, and gaming industries. It also investigates the returns of a new type of sin stock in the UK—online gambling. Chapter 3 first uses a vector autogressive model to study the impact of both rational and irrational investor sentiments on pure sin returns. Next, making use of a variety of sentiments-augmented asset pricing models, this research examines whether investor sentiment is a risk factor for sin stock returns and if the abnormal returns of sin stocks persist after controlling for investor sentiment. Finally, the possible relationship between investor sentiment and the conditional volatility of the sin portfolio is studied by utilizing a generalized autoregressive conditional heteroscedasticity-inmean model. The results indicate that rational-based sentiments shocks illicit a larger positive response in pure sin returns, than do irrational-based sentiments shocks. After controlling for the role of investor sentiment, the asset-pricing results suggest that the abnormal returns for sin stocks found in previous studies disappear. Furthermore, findings show that both individual and institutional investor sentiment are priced factors in sin stock returns. Additionally, results indicate that investor sentiment has a significant impact on sin stocks’ formation of volatility.

Chapter 4 of this dissertation examines the financial performance, time-varying betas, and time-varying correlations of an internet gambling portfolio relative to both the market and socially responsible portfolios. Findings indicate that the online gambling portfolio underperforms relative to both the market and socially responsible portfolios. The evidence also suggests that beta is time-varying for the online gambling portfolio. Furthermore, market betas and correlations for the online gambling portfolio increase considerably around the passage of the Gambling Act 2005.


Copyright 2011 Daniel Rafael Perez. All Rights Reserved.

Granting Institution

University of Texas-Pan American