The Mispricing of Socially Ambiguous Grey Stocks

15 Pages Posted: 8 Jan 2015 Last revised: 4 Jan 2017

See all articles by Swee Sum Lam

Swee Sum Lam

National University of Singapore - NUS Business School

Weina Zhang

Department of Finance, National University of Singapore; National University of Singapore Risk Management Institute

Gabriel Henry Jacob

Nanyang Technological University (NTU)

Date Written: May 4, 2015

Abstract

The study examines how stock market prices the stocks of socially ambiguous “Grey” firms, who are socially responsible in certain corporate social responsibility (CSR) dimensions while being socially irresponsible in other dimensions. Using firm data from 1992 to 2011, we find that the value-weighted “Grey” portfolio earns an annual abnormal return up to 3.6% relative to “Neutral” portfolio that consists of neither socially responsible nor irresponsible firms. Interestingly, “Community” and “Environment” sub-dimensions of CSR are the main drivers for the overpricing. The overpricing phenomenon is robust and is not driven by small firms, the “Sin” stocks or “Controversial” industries.

Keywords: Corporate Social Responsibility (CSR); Community; Controversial Industries; Environment; Socially Ambiguous Grey Stocks; Sin Stocks

JEL Classification: G02, G11, G12, G30

Suggested Citation

Lam, Swee Sum and Zhang, Weina and Jacob, Gabriel Henry, The Mispricing of Socially Ambiguous Grey Stocks (May 4, 2015). Finance Research Letters, May 2015, Vol 13 (5), 81-89. Available at SSRN: https://ssrn.com/abstract=2546697 or http://dx.doi.org/10.2139/ssrn.2546697

Swee Sum Lam

National University of Singapore - NUS Business School ( email )

1 Business Link
Singapore, 117592
Singapore
+65 6516 3037 (Phone)
+65 6779 2083 (Fax)

HOME PAGE: http://www.bschool.nus.edu

Weina Zhang (Contact Author)

Department of Finance, National University of Singapore ( email )

Mochtar Riady Building
15 Kent Ridge Drive
Singapore, 119245
Singapore
65168120 (Phone)
67792083 (Fax)

HOME PAGE: http://bizfaculty.nus.edu/faculty-profiles/108-weina

National University of Singapore Risk Management Institute ( email )

21 Heng Mui Keng Terrace
Level 4
Singapore, 119613
Singapore

Gabriel Henry Jacob

Nanyang Technological University (NTU) ( email )

S3 B2-A28 Nanyang Avenue
Singapore, 639798
Singapore

Register to save articles to
your library

Register

Paper statistics

Downloads
57
Abstract Views
846
rank
373,910
PlumX Metrics