Blue finance, investment choice and optimal portfolio allocation

Muhammad Zubair Mumtaz

Journal of Financial Regulation and Compliance, 2025, vol. 33, issue 4, 519-537

Abstract: PurposeThis study aims to empirically investigate the effect of a firm’s blueness on stock returns by developing the blueness index. Ocean firms listed on NASDAQ Baltic, Copenhagen, Helsinki, Iceland and Stockholm were selected to test the hypothesis.Design/methodology/approachThis study uses the system generalized method of moments technique and finds an inverse relationship between blueness and stock performance. As an alternative, their impact on stock performance is investigated using the environmental, social and governance (ESG) and environment (E) ratings. Additionally, by considering the blueness component, this study suggests a theoretical model to evaluate the utility function of the portfolio.FindingsThe results reveal that high-blue firms obtain lower returns than low-blue firms. This finding illustrates that high-blue firms obtain lower returns, as they comply with “blue” factors, and the possibility of risk would be lower. This study finds that lower ESG and E scores indicate ocean firms create lower emissions. Therefore, investors of high-blue firms obtain lower returns. To test the robustness of the blueness index, this study examines the effect of ESG and E ratings on a firm’s blueness. The results identify an inverse relationship between the ESG/E score and the blueness, illustrating that high-blue firms emit lower ocean emissions. The results of a theoretical model report that the proportion of investment in high-blue firms is higher for optimizing portfolio allocation.Originality/valueThis study determines firms’ blueness and impact on stock return. This study also considers ESG and E scores to identify their effect on ocean firm’s performance. The results contribute a theoretical understanding of factors determining the proportion of investment in high- and low-blue firms to optimize their portfolio.

Keywords: Blue finance; Ocean emissions; Blueness index; Portfolio allocation; NASDAQ (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfrcpp:jfrc-11-2024-0241

DOI: 10.1108/JFRC-11-2024-0241

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