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Multi-criteria decision making for choosing socially responsible investment within a behavioral portfolio theory framework: a new way of investing into a crisis environment

Author

Listed:
  • Amelia Bilbao-Terol

    (University of Oviedo)

  • Mar Arenas-Parra

    (University of Oviedo)

  • Verónica Cañal-Fernández

    (University of Oviedo)

  • Celia Bilbao-Terol

    (University of Oviedo)

Abstract

The current economic crisis fuels the financial social responsibility after an epoch of many excesses with damaging effects. This work tackles two emerging streams in the financial literature: the behavioral portfolio theory with mental accounting and the socially responsible investment (SRI). Promoting SRI is regarded by a lot of financial experts, policymakers and researchers from the field of economic and social sciences, as one of the potential solutions in order to avoid future crises. Therefore, new models for this investment approach are necessary. We try to support the class of investors that select their investments under a mental accounting framework and also they want to achieve a certain level of SR quality in their portfolios. In order to reconcile the two choice frames, avoiding unnecessary sacrifices in financial performance, we have designed a model based on goal programming that integrates the two cornerstones of the investor. Furthermore, we propose a fuzzy inference system to determine the amount of money allocated to each mental account as well as the confidence level assigned to each mental account. This tool is based on expert knowledge modeled by fuzzy if–then rules.

Suggested Citation

  • Amelia Bilbao-Terol & Mar Arenas-Parra & Verónica Cañal-Fernández & Celia Bilbao-Terol, 2016. "Multi-criteria decision making for choosing socially responsible investment within a behavioral portfolio theory framework: a new way of investing into a crisis environment," Annals of Operations Research, Springer, vol. 247(2), pages 549-580, December.
    • Handle: RePEc:spr:annopr:v:247:y:2016:i:2:d:10.1007_s10479-015-1947-9
    DOI: 10.1007/s10479-015-1947-9
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