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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

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.

Suggested Citation

  • Boudt, Kris & Cornelissen, Jonathan & Croux, Christophe, 2013. "The impact of a sustainability constraint on the mean-tracking error efficient frontier," Economics Letters, Elsevier, vol. 119(3), pages 255-260.
    • Handle: RePEc:eee:ecolet:v:119:y:2013:i:3:p:255-260
    DOI: 10.1016/j.econlet.2013.03.020
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    References listed on IDEAS

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    1. 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.
    2. Hallerbach, Winfried & Ning, Haikun & Soppe, Aloy & Spronk, Jaap, 2004. "A framework for managing a portfolio of socially responsible investments," European Journal of Operational Research, Elsevier, vol. 153(2), pages 517-529, March.
    3. Jeroen Derwall & Kees Koedijk, 2009. "Socially Responsible Fixed-Income Funds," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 36(1-2), pages 210-229.
    4. Stefano Herzel & Marco Nicolosi & Cătălin Stărică, 2012. "The cost of sustainability in optimal portfolio decisions," The European Journal of Finance, Taylor & Francis Journals, vol. 18(3-4), pages 333-349, May.
    5. Ledoit, Olivier & Wolf, Michael, 2003. "Improved estimation of the covariance matrix of stock returns with an application to portfolio selection," Journal of Empirical Finance, Elsevier, vol. 10(5), pages 603-621, December.
    6. 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.
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    Cited by:

    1. Víctor Amor-Esteban & Mª-Purificación Galindo-Villardón & Fátima David, 2018. "Study of the Importance of National Identity in the Development of Corporate Social Responsibility Practices: A Multivariate Vision," Administrative Sciences, MDPI, vol. 8(3), pages 1-33, August.
    2. Víctor Amor-Esteban & Mª-Purificación Galindo-Villardón & Isabel-María García-Sánchez, 2019. "A Multivariate Proposal for a National Corporate Social Responsibility Practices Index (NCSRPI) for International Settings," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 143(2), pages 525-560, June.
    3. Apostolakis, George & van Dijk, Gert & Kraanen, Frido & Blomme, Robert J., 2018. "Examining socially responsible investment preferences: A discrete choice conjoint experiment," Journal of Behavioral and Experimental Finance, Elsevier, vol. 17(C), pages 83-96.
    4. Maike van Dijk-de Groot & Andre H.J. Nijhof, 2015. "Socially Responsible Investment Funds: a review of research priorities and strategic options," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 5(3), pages 178-204, July.
    5. Víctor Amor‐Esteban & Ma‐Purificación Galindo‐Villardón & Isabel‐María García‐Sánchez & Fátima David, 2019. "An extension of the industrial corporate social responsibility practices index: New information for stakeholder engagement under a multivariate approach," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 26(1), pages 127-140, January.

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    More about this item

    Keywords

    Mean-tracking error optimization; Portfolio optimization; Socially responsible investment; Sustainability;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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