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Macro Asset Allocation with Social Impact Investments

Massimo Biasin (), Roy Cerqueti (), Emanuela Giacomini (), Nicoletta Marinelli (), Anna Grazia Quaranta () and Luca Riccetti ()
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Massimo Biasin: Economics and Law Department, University of Macerata, via Crescimbeni 14, 62100 Macerata, Italy
Emanuela Giacomini: Economics and Law Department, University of Macerata, via Crescimbeni 14, 62100 Macerata, Italy
Anna Grazia Quaranta: Economics and Law Department, University of Macerata, via Crescimbeni 14, 62100 Macerata, Italy

Sustainability, 2019, vol. 11, issue 11, 1-19

Abstract: Using a unique dataset of 50 listed companies that meet the majority of the OECD requirements for social impact investments, we construct a social impact finance stock index and investigate how investing in social impact firms can contribute to portfolio risk-return performance. We build portfolios with three different methodologies (naïve, Markowitz mean-variance optimization, GARCH-copula model), and we study the performance in terms of returns, Sharpe ratio, utility, and forecast premium based on a constant relative risk aversion function for investors with different levels of risk aversion. Consistent with the idea that social impact investment can improve portfolio risk-return performance, the results of our macro asset allocation analysis show the importance of a large fraction of investor portfolios’ stake committed to social impact investments.

Keywords: social impact investments; asset allocation; portfolio diversification; out-of-sample performance; market index (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2019
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