Does Risk Propensity of Investors Affect the Heuristic Choice of SRI Portfolio Selection?—A Comparison between a Market Portfolio and SRI Portfolio

Soma Panja

Global Business Review, 2022, vol. 23, issue 6, 1481-1491

Abstract: From the last few years, awareness of socially responsible investments (SRI) investment is increasing in India. Study in SRI portfolio is gaining importance in finance research. To select an optimum portfolio (SRI or non-SRI), the investor should have basic knowledge about the weights. It is found that equal weight does not always give the desired result to the investors. An investor can also define the weight function heuristically based on their risk propensity to avoid the criticality in statistical calculation. The present article tries to get a heuristic optimum portfolio by comparing the SRI and non-SRI portfolios based on the risk-taking ability of the investors. Two types of investors are considered–optimistic and pessimistic. SENSEX and GREENEX are considered as non-SRI and SRI portfolios respectively. The main aim of the study is to see what type of investors get near optimum solutions if they go for SRI investment. After the analysis, it is found that the pessimistic investors’ decision is nearer to the optimum solution as compared to the optimistic investors’ decision if they go for SRI investment. So, it can be said that the pessimistic investors’ investment decision is better when compared to the optimistic investors in SRI investment.

Keywords: Portfolio optimization; heuristics; optimistic investor; pessimistic investor; CBD (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:sae:globus:v:23:y:2022:i:6:p:1481-1491

DOI: 10.1177/09721509221120795

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