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A new approach for optimizing responsible investments dependently on the initial wealth

Author

Listed:
  • Gregor Dorfleitner

    (University of Regensburg)

  • Mai Nguyen

    (University of Regensburg)

Abstract

This article introduces two approaches for modelling the dependency of the optimal portfolio choice on the available amount of investment volume from the perspective of socially responsible investors who seek both financial and ethical benefits. We complement the expected utility framework and the mean-variance portfolio selection model by a sustainability dimension to account for the additional utility that investors derive from the social attribute of the investment. By using a numeric example, we illustrate how the optimal investment choice changes depending on the initial wealth and the investor’s appreciation of sustainable and responsible objectives. The applicability of the proposed models is shown by an actual investment case.

Suggested Citation

  • 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.
    • Handle: RePEc:pal:assmgt:v:18:y:2017:i:2:d:10.1057_s41260-016-0011-x
    DOI: 10.1057/s41260-016-0011-x
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    References listed on IDEAS

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    Cited by:

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    2. Marcos Escobar-Anel & Yiyao Jiao, 2023. "Unraveling the Trade-off between Sustainability and Returns: A Multivariate Utility Analysis," Papers 2307.12161, arXiv.org.
    3. Escobar-Anel, Marcos, 2022. "Multivariate risk aversion utility, application to ESG investments," The North American Journal of Economics and Finance, Elsevier, vol. 63(C).
    4. Wenbing Luo & Ziyan Tian & Shihu Zhong & Qinke Lyu & Mingjun Deng, 2022. "Global Evolution of Research on Sustainable Finance from 2000 to 2021: A Bibliometric Analysis on WoS Database," Sustainability, MDPI, vol. 14(15), pages 1-23, August.
    5. Jean D. Kabongo, 2019. "Sustainable development and research and development intensity in U.S. manufacturing firms," Business Strategy and the Environment, Wiley Blackwell, vol. 28(4), pages 556-566, May.

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    More about this item

    Keywords

    finance; socially responsible investing; expected utility theory; portfolio optimization; non-financial utility;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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