Selection of Socially Responsible Portfolios Using Hedonic Prices

Amelia Bilbao-Terol (), Mar Arenas-Parra (), Verónica Cañal-Fernández () and Celia Bilbao-Terol ()

Journal of Business Ethics, 2013, vol. 115, issue 3, 515-529

Abstract: This paper presents a novel framework for selecting socially responsible investment (SRI) portfolios. The Hedonic Price Method (HPM) is applied to obtain an evaluation of SRI criteria that is integrated into a multi-objective mathematical programming model. The HPM breaks away from the traditional view that goods are the direct object of utility; on the contrary, it assumes that utility is derived from the properties or characteristics of the goods themselves. As far as the investment decision is concerned, we assume that socially responsible investmentmutual funds (SRI funds) constitute heterogeneous goods. Our approach allows us to obtain a portfolio, the financial performance of which is similar to that which the investor would have reached if he or she had not taken into account social, ethical, and environmental considerations when making his or her investment decisions. This is achieved by designing a two-stage multi-objective mathematical programming procedure. In the first stage, we achieve the maximum level of financial satisfaction that the investor can receive. In the second stage, the portfolio with the best financial–social behavior is built. For the purpose of this second stage, the first stage portfolio is used as a benchmark for the financial performance of a socially responsible portfolio. To apply this methodology, we use portfolios composed of socially responsible and conventional mutual funds domiciled in Spain. Copyright Springer Science+Business Media B.V. 2013

Keywords: Socially responsible investment; Portfolio selection; Mutual funds; Multi-objective programming; Hedonic prices; Variance; Conditional value-at-risk; Certainty equivalent (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

Downloads: (external link)
http://hdl.handle.net/10.1007/s10551-012-1411-6 (text/html)
Access to full text is restricted to subscribers.

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:kap:jbuset:v:115:y:2013:i:3:p:515-529

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10551/PS2

DOI: 10.1007/s10551-012-1411-6

Access Statistics for this article

Journal of Business Ethics is currently edited by Michelle Greenwood and R. Edward Freeman

More articles in Journal of Business Ethics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().