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Ethically Constrained Portfolio Selection of Funds by CP Modelling: A Real World Environmental Case

In: Socially Responsible Investment

Author

Listed:
  • Ana Garcia-Bernabeu

    (Universitat Politècnica de València)

  • Blanca Pérez-Gladish

    (Universidad de Oviedo)

  • Adolfo Hilario

    (Universitat Politècnica de València)

Abstract

In CP models to select ethical financial portfolios of securities, the ethical component can be articulated either by introducing SRI objectives or by introducing SRI constraints. None of these procedures is free of drawbacks. To place SRI objectives seems appealing because trade-offs can be stated between SRI goals and financial goals. However, to build these trade-offs requires articulating investor’s preference weights for SRI and financial objectives. To elicit these weights is quite impossible in mutual funds because preferences differ from one investor to another in the fund. We propose a multicriteria portfolio selection model for mutual funds based on CP which takes into account both, a financial and a non-financial dimension taking into account the subjective and individual preferences of an individual investor under two different scenarios: a low social responsibility degree and a high social responsibility degree scenario. An real case study is performed on 110 large cap equity mutual funds.

Suggested Citation

  • Ana Garcia-Bernabeu & Blanca Pérez-Gladish & Adolfo Hilario, 2015. "Ethically Constrained Portfolio Selection of Funds by CP Modelling: A Real World Environmental Case," International Series in Operations Research & Management Science, in: Enrique Ballestero & Blanca Pérez-Gladish & Ana Garcia-Bernabeu (ed.), Socially Responsible Investment, edition 127, chapter 0, pages 197-210, Springer.
    • Handle: RePEc:spr:isochp:978-3-319-11836-9_10
    DOI: 10.1007/978-3-319-11836-9_10
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