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The impact of a sustainability constraint on the mean-tracking error efficient frontier

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  • Boudt, Kris
  • Cornelissen, Jonathan
  • Croux, Christophe
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    Abstract

    Most socially responsible investment funds combine a sustainability objective with a tracking error constraint. We characterize the impact of a sustainability constraint on the mean-tracking error efficient frontier and illustrate this on a universe of US stocks for the period 2003–2010.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0165176513001298
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    Bibliographic Info

    Article provided by Elsevier in its journal Economics Letters.

    Volume (Year): 119 (2013)
    Issue (Month): 3 ()
    Pages: 255-260

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    Handle: RePEc:eee:ecolet:v:119:y:2013:i:3:p:255-260

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    Web page: http://www.elsevier.com/locate/ecolet

    Related research

    Keywords: Mean-tracking error optimization; Portfolio optimization; Socially responsible investment; Sustainability;

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    1. Hallerbach, W.G.P.M. & Ning, H. & Soppe, A.B.M. & Spronk, J., 2002. "A Framework for Managing a Portfolio of Socially Responsible Investments," ERIM Report Series Research in Management ERS-2002-54-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
    2. Olivier Ledoit & Michael Wolf, 2001. "Improved estimation of the covariance matrix of stock returns with an application to portofolio selection," Economics Working Papers 586, Department of Economics and Business, Universitat Pompeu Fabra.
    3. Stefano Herzel & Marco Nicolosi & Catalin Starica, 2011. "The cost of sustainability on optimal portfolio choices," Quaderni del Dipartimento di Economia, Finanza e Statistica 84/2011, Università di Perugia, Dipartimento Economia, Finanza e Statistica.
    4. Bauer, Rob & Koedijk, Kees & Otten, Roger, 2005. "International evidence on ethical mutual fund performance and investment style," Journal of Banking & Finance, Elsevier, vol. 29(7), pages 1751-1767, July.
    5. Jeroen Derwall & Kees Koedijk, 2009. "Socially Responsible Fixed-Income Funds," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 36(1-2), pages 210-229.
    6. Derwall, Jeroen & Koedijk, Kees & Ter Horst, Jenke, 2011. "A tale of values-driven and profit-seeking social investors," Journal of Banking & Finance, Elsevier, vol. 35(8), pages 2137-2147, August.
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