Ethical Investing Has No Portfolio Performance Cost

Yufen Fu, Danika Wright and George Blazenko

Research in International Business and Finance, 2020, vol. 52, issue C

Abstract: We guide investors in three ethical investment applications by comparing ethically constrained versus unconstrained optimal portfolio methods that force well-behaved weights. With optimal readjustment upon constrained investing, in Sharpe ratio analysis, we find no evidence of a performance cost for sin-free, carbon-free, or Shariah portfolios even though, in the most exacting case, Shariah investing excludes roughly 65% of common shares from security selection. In each case, we identify the specific portfolio adjustments needed to prevent an ethical portfolio performance cost.

Keywords: Sin-Free; Carbon-Free; Shariah; Investing; Normative Portfolio Theory (search for similar items in EconPapers)
JEL-codes: G11 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:52:y:2020:i:c:s0275531918305257

DOI: 10.1016/j.ribaf.2019.101117

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