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Theory of social returns in portfolio choice with application to microfinance

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  • Gregor Dorfleitner

    (University of Regensburg)

  • Michaela Leidl
  • Johannes Reeder

Abstract

We complement the Markowitz portfolio theory by adding a social dimension. Every asset is assigned a social return, which is generally modeled as stochastic. We focus on the theoretical foundation and practical implications of portfolio choice with social returns. We apply the theoretical model to two different microfinance investments. First, we consider an investor who is risk-neutral in the social dimension and faces a small number of assets: an equity index, a bond index and a microfinance investment fund (MFIF). Second, we address the question of how MFIFs should allocate funds to microfinance institutions.

Suggested Citation

  • Gregor Dorfleitner & Michaela Leidl & Johannes Reeder, 2012. "Theory of social returns in portfolio choice with application to microfinance," Journal of Asset Management, Palgrave Macmillan, vol. 13(6), pages 384-400, December.
    • Handle: RePEc:pal:assmgt:v:13:y:2012:i:6:d:10.1057_jam.2012.18
    DOI: 10.1057/jam.2012.18
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    Cited by:

    1. Utz, Sebastian & Wimmer, Maximilian & Hirschberger, Markus & Steuer, Ralph E., 2014. "Tri-criterion inverse portfolio optimization with application to socially responsible mutual funds," European Journal of Operational Research, Elsevier, vol. 234(2), pages 491-498.
    2. Gasser, Stephan M. & Rammerstorfer, Margarethe & Weinmayer, Karl, 2017. "Markowitz revisited: Social portfolio engineering," European Journal of Operational Research, Elsevier, vol. 258(3), pages 1181-1190.
    3. Marie Briere & Ariane Szafarz, 2015. "Does commercial microfinance belong to the financial sector? Lessons from the stock market," Post-Print CEB, ULB -- Universite Libre de Bruxelles, vol. 67, pages 110-125, March.
    4. Yue Qi, 2022. "Classifying the minimum-variance surface of multiple-objective portfolio selection for capital asset pricing models," Annals of Operations Research, Springer, vol. 311(2), pages 1203-1227, April.
    5. Danson, Mike & Galloway, Laura & Sherif, Mohamed, 2021. "From unemployment to self-employment: Can enterprise policy intensify the risks of poverty?," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 75(C).
    6. Yue Qi & Ralph E. Steuer & Maximilian Wimmer, 2017. "An analytical derivation of the efficient surface in portfolio selection with three criteria," Annals of Operations Research, Springer, vol. 251(1), pages 161-177, April.
    7. Nomeda Dobrovolskienė & Rima Tamošiūnienė, 2016. "Sustainability-Oriented Financial Resource Allocation in a Project Portfolio through Multi-Criteria Decision-Making," Sustainability, MDPI, vol. 8(5), pages 1-18, May.
    8. Dorfleitner, Gregor & Röhe, Michaela & Renier, Noémie, 2017. "The access of microfinance institutions to debt capital: An empirical investigation of microfinance investment vehicles," The Quarterly Review of Economics and Finance, Elsevier, vol. 65(C), pages 1-15.
    9. Mónica García-Melón & Blanca Pérez-Gladish & Tomás Gómez-Navarro & Paz Mendez-Rodriguez, 2016. "Assessing mutual funds’ corporate social responsibility: a multistakeholder-AHP based methodology," Annals of Operations Research, Springer, vol. 244(2), pages 475-503, September.
    10. Marcos Escobar-Anel & Yiyao Jiao, 2023. "Unraveling the Trade-off between Sustainability and Returns: A Multivariate Utility Analysis," Papers 2307.12161, arXiv.org.
    11. repec:dau:papers:123456789/14039 is not listed on IDEAS
    12. Qi, Yue & Liao, Kezhi & Liu, Tongyang & Zhang, Yu, 2022. "Originating multiple-objective portfolio selection by counter-COVID measures and analytically instigating robust optimization by mean-parameterized nondominated paths," Operations Research Perspectives, Elsevier, vol. 9(C).
    13. Calvo, Clara & Ivorra, Carlos & Liern, Vicente, 2015. "Finding socially responsible portfolios close to conventional ones," International Review of Financial Analysis, Elsevier, vol. 40(C), pages 52-63.
    14. Yue Qi, 2017. "On the criterion vectors of lines of portfolio selection with multiple quadratic and multiple linear objectives," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 25(1), pages 145-158, March.
    15. Sabastian Utz & Maximillian Wimmer, 2014. "Are they any good at all? A financial and ethical analysis of socially responsible mutual funds," Journal of Asset Management, Palgrave Macmillan, vol. 15(1), pages 72-82, February.
    16. Dorfleitner, Gregor & Kreuzer, Christian & Laschinger, Ralf, 2021. "How socially irresponsible are socially responsible mutual funds? A persistence analysis," Finance Research Letters, Elsevier, vol. 43(C).
    17. Julian Amon & Margarethe Rammerstorfer & Karl Weinmayer, 2021. "Passive ESG Portfolio Management—The Benchmark Strategy for Socially Responsible Investors," Sustainability, MDPI, vol. 13(16), pages 1-21, August.
    18. Gregor Dorfleitner & Mai Nguyen, 2017. "A new approach for optimizing responsible investments dependently on the initial wealth," Journal of Asset Management, Palgrave Macmillan, vol. 18(2), pages 81-98, March.

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