Charitable Giving and NPOs Investment Decision in a Stochastic Dynamic Economy

Han Jiang and Aggey Simons ()
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Aggey Simons: Department of Economics, University of Ottawa, Ottawa, ON
Authors registered in the RePEc Author Service: Aggey Semenov

No 2402E, Working Papers from University of Ottawa, Department of Economics

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.

Keywords: Non-Profit Investments; Donor Dynamics; Financial Volatility; Risk Management; Stochastic Differential Game. (search for similar items in EconPapers)
JEL-codes: C73 D64 G11 G23 L31 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2024
New Economics Papers: this item is included in nep-gth
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Working Paper: Charitable Giving and NPOs Investment Decision in a Stochastic Dynamic Economy (2021)
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