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Charitable Giving and NPOs Investment Decision in a Stochastic Dynamic Economy

Author

Listed:
  • Han Jiang

    (Department of Economics, University of Ottawa, Ottawa, ON)

  • Aggey Simons

    (Department of Economics, University of Ottawa, Ottawa, ON)

Abstract

We study the dynamic interaction between donors’ contributions and the investment strategies of a non-profit organization (NPO) amid fluctuating donor income and varying financial market conditions. The analysis reveals a consistent pattern in the NPO’s allocation strategy, directing a fixed proportion of its endowment toward higher-risk assets. Notably, increased donor support often correlates with the NPO’s heightened activity in financial markets, which can occasionally reduce the provision of charitable goods. A significant finding is the NPO’s preference for environments with lower returns on risk-free assets. Additionally, the study delineates the contrasting impacts of financial market uncertainties and donor income variations on the decision-making processes of both donors and the NPO; while market volatility significantly shapes strategies for both groups, fluctuations in donor income have minimal impact on their strategic decisions.

Suggested Citation

  • Han Jiang & Aggey Simons, 2024. "Charitable Giving and NPOs Investment Decision in a Stochastic Dynamic Economy," Working Papers 2402E, University of Ottawa, Department of Economics.
    • Handle: RePEc:ott:wpaper:2402e
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    File URL: http://hdl.handle.net/10393/46191
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    References listed on IDEAS

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    More about this item

    Keywords

    Non-Profit Investments; Donor Dynamics; Financial Volatility; Risk Management; Stochastic Differential Game.;
    All these keywords.

    JEL classification:

    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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