 Sustainable risk preferences on asset allocation: a higher order optimal portfolio studyAntonio Díaz, Ana Escribano and Carlos Esparcia Journal of Behavioral and Experimental Finance, 2024, vol. 41, issue C Abstract: This paper empirically investigates the financial performance of asset allocation strategies under “sustainable” risk preferences and conventional risk preferences. We assume that traditional investors and ESG investors behave differently in their investment decisions. The optimal portfolio choice is developed including dynamic higher order conditional co-moments and time-varying risk aversion. From an out-of-sample empirical experiment, we observe that this optimization technique provides much more stable optimal weights for the sustainable portfolio than for the traditional one. Based on both classical and downside-risk performance measures, active management in both portfolios outperforms the global market index. In this context, the non-inclusion of skewness and kurtosis leads to an underestimation of actual risk exposure. Finally, we provide empirical evidence that the sustainable portfolio largely outperformances the traditional investment. Keywords: Risk aversion; Utility function; Sustainability; Portfolio choice; 4th order moments (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:beexfi:v:41:y:2024:i:c:s2214635024000029 DOI: 10.1016/j.jbef.2024.100887 Access Statistics for this article Journal of Behavioral and Experimental Finance is currently edited by Michael Dowling and Jürgen Huber More articles in Journal of Behavioral and Experimental Finance from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.