Risk Management Opportunities between Socially Responsible Investments and Selected Commodities

Daniel Cupriak, Katarzyna Kuziak and Tomasz Popczyk
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Daniel Cupriak: Department of Financial Investments and Risk Management, Wroclaw University of Economics and Business, 53-345 Wroclaw, Poland
Katarzyna Kuziak: Department of Financial Investments and Risk Management, Wroclaw University of Economics and Business, 53-345 Wroclaw, Poland
Tomasz Popczyk: Department of Financial Investments and Risk Management, Wroclaw University of Economics and Business, 53-345 Wroclaw, Poland

Sustainability, 2020, vol. 12, issue 5, 1-20

Abstract: Socially responsible investing (SRI) or sustainable, responsible, and impact investing is growing fast. The net total of SRI assets at the beginning of 2018 was USD 12.0 trillion. There is extensive literature on SRI, but very little of it relates to portfolio construction and risk management combining SRI and commodities. In this paper, the authors pay attention to model volatility and dynamic conditional correlations between SRI investment and selected representative of commodities. We state the following hypothesis: the potential to create portfolio and risk management opportunities exists between SRI and commodities such as grain, precious metals, and industrial metals. To verify this, modeling of volatility and dynamic conditional correlation (DCC) between pair of elements is necessary. Empirical research conducted for the global market based on selected indices for SRI and commodities confirms this hypothesis. These results can improve asset selection in portfolio construction and allow investors to make more reasonable decisions.

Keywords: socially responsible investing (SRI), sustainable; responsible and impact (SRI) investing; DCC; GARCH; risk diversification (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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