Combinatorial Nonlinear Goal Programming for ESG Portfolio Optimization and Dynamic Hedge Management

Gordon H. Dash () and Nina Kajiji ()
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Gordon H. Dash: University of Rhode Island, Finance and Decision Sciences Area, College of Business Administration
Nina Kajiji: University of Rhode Island, Department of Computer Science and Statistics

A chapter in Mathematical and Statistical Methods for Actuarial Sciences and Finance, 2014, pp 77-80 from Springer

Abstract: Abstract Compared to their fundamentally weighted counterparts naively diversified investment portfolios that embrace environmental, sustainability and governance (ESG) factors are known to experience enhanced long-term investment performance. This paper introduces a combinatorial nonlinear multiple objective optimization model to diversify the short-term ESG portfolio. The expectation of long-term wealth creation from an ESG portfolio is also examined. This latter investment objective is explored by implementing a discrete period ESG portfolio re-balancing with attached dynamic hedging. Post simulation, we report comparatively higher Sharpe ratios and lower VaR metrics for the multiobjective and dynamically hedged ESG portfolio investment style.

Keywords: Combinatorial goal programing; ESG-factor portfolios; Hedging (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-319-05014-0_18

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DOI: 10.1007/978-3-319-05014-0_18

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