Socially Responsible Investment: A multicriteria approach to portfolio selection combining ethical and financial objectives

Enrique Ballestero, Mila Bravo, Blanca Pérez-Gladish, Mar Arenas-Parra and David Pla-Santamaria

European Journal of Operational Research, 2012, vol. 216, issue 2, 487-494

Abstract: In a context of Socially Responsible Investment (SRI), this paper deals with portfolio selection for investors interested in ethical policies. In the opportunity set there are ethical assets and other assets which are not characterized as ethical. Two goals are considered, the traditional financial goal in the classical utility theory under uncertainty and an ethical goal in the same utility framework. A new financial-ethical bi-criteria model is proposed with absolute risk aversion coefficients and targets depending on the investor’s ethical profile. This approach is relevant as an increasing number of mutual funds are becoming interested in SRI strategies. From the proposed model, an actual case on green investment is developed. Concerning this case (without generalizing to other contexts), an analysis of the numerical results shows that efficient portfolios obtained by the traditional E-V model outperform the strong green portfolios in terms of expected return and risk, but this does not significantly occur with weak green investment.

Keywords: Investment analysis; Stock portfolio selection; Ethical investment; OR in finance (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (60)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0377221711006138
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:216:y:2012:i:2:p:487-494

DOI: 10.1016/j.ejor.2011.07.011

Access Statistics for this article

European Journal of Operational Research is currently edited by Roman Slowinski, Jesus Artalejo, Jean-Charles. Billaut, Robert Dyson and Lorenzo Peccati

More articles in European Journal of Operational Research from Elsevier
Bibliographic data for series maintained by Catherine Liu ().