This research examines whether stocks of firms operating in highly polluting industries ('dirty stocks') are treated like sin stocks. We assume that investors shun dirty stocks based on non-pecuniary preferences and employ screening approaches that lead to the exclusion of entire industries....

This research examines whether stocks of firms operating in highly polluting industries (“dirty stocks”) are treated like sin stocks. We assume that investors shun dirty stocks based on non-pecuniary preferences and employ screening approaches that lead to the exclusion of entire industries....

This research identifies investors’ environmental tastes as an explanation of the pollution premium in asset pricing. Showing that stocks of firms with higher toxic emissions earn higher risk-adjusted returns in the cross-section of the US stock market, we find that environmental tastes are...