Original Research

The performance of morally questionable shares in South Africa (2004–2019)

Johannes P. Steyn, Suzette Viviers
Journal of Economic and Financial Sciences | Vol 13, No 1 | a549 | DOI: https://doi.org/10.4102/jef.v13i1.549 | © 2020 Johannes P. Steyn, Suzette Viviers | This work is licensed under CC Attribution 4.0
Submitted: 23 January 2020 | Published: 22 October 2020

About the author(s)

Johannes P. Steyn, Department of Business Management, Faculty of Economic and Management Sciences, Stellenbosch University, Cape Town, South Africa
Suzette Viviers, Department of Business Management, Faculty of Economic and Management Sciences, Stellenbosch University, Cape Town, South Africa

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Orientation: Investors are increasingly weighing up the cost of investing in companies with adverse impacts on society and the natural environment.

Research purpose: In light of the shift to responsible investing, this study compared the risk-adjusted performance of a portfolio of morally questionable shares listed on the Johannesburg Stock Exchange (JSE) to a portfolio consisting of morally acceptable (responsible) ones.

Motivation for the study: Although previous research suggests that investors can perform well by investing in morally questionable shares (such as alcohol and tobacco), sentiment is rapidly moving towards a more responsible approach to selecting shares.

Research approach/design and method: The historic returns of equity portfolios were evaluated over the period July 2004 to April 2019. Two equally weighted portfolios were constructed: one for morally questionable shares and the other for morally acceptable shares. These portfolios’ risk-adjusted returns were compared to the JSE Responsible Investment Composite Index, the Financial Times Stock Exchange/JSE Shareholder Weighted Index and an equally weighted benchmark. In addition, the analysis was divided into two distinct sub-periods, covering the financial crisis and the subsequent recovery period. Morally questionable companies included those with exposure to alcohol, tobacco, gambling, oil, gas and coal.

Main findings: Morally questionable investing in South Africa does not produce risk-adjusted outperformance. No evidence was found to support the theories predicting the outperformance of morally questionable shares on the JSE.

Practical/managerial implications: Socially and environmentally conscious investors can achieve risk-adjusted returns comparable to those of investors who opt to invest in morally questionable shares and conventional benchmarks.

Contribution/value-add: The study provides insights for investors who are concerned about the opportunity costs of adopting a responsible investment approach.


vice investing; ethical investing; virtue investing; responsible investing; moral acceptability


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