Smart Grid ETFS: Evaluating Risk, Return, and Diversification Benefits in Sustainable Investment Portfolios

Cristiana Tudor () and Robert Sova ()
Additional contact information
Cristiana Tudor: Bucharest University of Economic Studies
Robert Sova: Bucharest University of Economic Studies

A chapter in Building Economic Resilience, 2025, pp 261-282 from Springer

Abstract: Abstract The smart grid plays a pivotal role in advancing sustainability and achieving the goals of the 2030 Agenda for Sustainable Development. By integrating advanced digital technologies smart grids improve the efficiency and reliability of electricity transmission, while supporting large-scale renewable energy integration. This paper analyzes the financial landscape of smart grid technologies through a comprehensive examination of Exchange-Traded Funds (ETFs) that invest in this sector. Using portfolio optimization techniques, including Monte Carlo simulation and efficient frontier analysis, the study evaluates the risk-return profiles and diversification benefits of smart grid ETFs compared to traditional diversified portfolios. The results show that smart grid ETFs like GRID exhibit annualized returns of approximately 20% with a volatility of around 25%, which is significantly higher than the returns of traditional energy sector ETFs like XLE, which show a return of 8% but with a higher volatility of around 35%. This study provides insights for investors and policymakers by demonstrating that smart grid ETFs offer a strategic opportunity to increase portfolio performance while aligning with sustainable investment objectives.

Keywords: 2030 agenda; Minimum Variance Portfolio (MVP); Monte Carlo simulation; Portfolio diversification; Portfolio optimization; Sharpe ratio; Single Factor Model (SFM); Tangency Portfolio (TP); Treynor ratio; C58; G11; G15; G17 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:spr:conchp:978-3-031-96428-2_11

Ordering information: This item can be ordered from
http://www.springer.com/9783031964282

DOI: 10.1007/978-3-031-96428-2_11

Access Statistics for this chapter

More chapters in Contributions to Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().