Optimal responsible investment
AbstractThe article examines responsible investment portfolio allocation. The analysis defines an investor-specific measure of portfolio responsibility and incorporates this measure into two different conventional investment approaches. First, investor utility theory describes preferences for portfolio responsibility. The utility setup is intuitive; however, any implementation would require information on investor trade-offs between portfolio risk, expected return and responsibility. Second, mean-variance analysis captures portfolio responsibility with an additional restriction on the investment problem. This approach yields analytical solutions for the optimal responsible investment problem and provides a sensitivity analysis of the required portfolio responsibility. An example concerning index investment corroborates the results.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Financial Economics.
Volume (Year): 22 (2012)
Issue (Month): 21 (November)
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Web page: http://www.tandfonline.com/RAFE20
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