Adding an Ethical Dimension to Portfolio Management

Dupré, Denis; Girerd‐Potin, Isabelle; Kassoua, Raghid

doi:10.2139/ssrn.394101

Cited by 17 publications

(19 citation statements)

References 6 publications

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“…The combined procedure of screening and standard portfolio optimization might be considered a bounded rationality approach in that investors optimize only after having greatly reduced the complexity of the problem by having limited their choices available. Dupré, Girerd-Potin, and Kassoua (2004) apply screening to a large set of assets, determine the pre-and post-screening efficient frontiers and confirm intuition: By reduced diversification possibilities, the efficient portfolios after screening are financially worse than the ones before screening. Clearly, social returns of individual assets differ considerably and might even be considered stochastic, as already noted by Dupré, Girerd-Potin, and Kassoua (2004).…”

Section: Introductionmentioning

confidence: 67%

Theory of social returns in portfolio choice with application to microfinance

Dorfleitner

Leidl²,

Reeder³

2012

J Asset Manag

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We complement standard portfolio theory à la Markowitz by adding a social dimension. We distinguish between two main setups, taking social returns as stochastic in the first, but as deterministic in the second. Two main features need to be introduced: Every asset must be assigned a (distribution of) social return(s), and the investor has to cherish social returns. The former comes with measurement problems, whereas the latter is mainly a problem of choice of a suitable utility representation. The focus of this paper is on the theoretical fundamentals and the practical implications of social returns. We apply each version of the theoretical model to a different realm. In the deterministic setup, we look at an investor who faces a small number of assets: the S&P Euro Index, the EuroMTS Global Index, and the responsAbility Global Microfinance, where we assign a social return only to the microfinance investment fund. In the second application with stochastic social returns, we estimate statistical moments of social returns of various microfinance institutions and address the question how microfinance investment funds should allocate funds to microfinance institutions. We complement standard portfolio theory à la Markowitz by adding a social dimension. We distinguish between two main setups, taking social returns as stochastic in the first, but as deterministic in the second. Two main features need to be introduced: Every asset must be assigned a (distribution of) social return(s), and the investor has to cherish social returns. The former comes with measurement problems, whereas the latter is mainly a problem of choice of a suitable utility representation. The focus of this paper is on the theoretical fundamentals and the practical implications of social returns. We apply each version of the theoretical model to a different realm. In the deterministic setup, we look at an investor who faces a small number of assets: the S&P Euro Index, the EuroMTS Global Index, and the responsAbility Global Microfinance, where we assign a social return only to the microfinance investment fund. In the second application with stochastic social returns, we estimate statistical moments of social returns of various microfinance institutions and address the question how microfinance investment funds should allocate funds to microfinance institutions. JEL-classification: G11, G21, G32, D64, D81

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Section: Introductionmentioning

confidence: 67%

Theory of social returns in portfolio choice with application to microfinance

Dorfleitner

Leidl²,

Reeder³

2012

J Asset Manag

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“…From this they use a multi-step optimization process to determine the optimal portfolio for this individual investor. Dupré et al (2004) use rating data provided by the French rating agency ARESE, to determine the social component in their portfolio optimization approach. ARESE uses five different criteria to assign their rating: human resources, environment/health/safety, relations between customers and suppliers, relations between stakeholders, relations with the community.…”

Section: Sr Investment Rating and New Approaches For Implementationmentioning

confidence: 99%

Ethical requirement and financial interest: a literature review on socially responsible investing

Wallis¹,

Klein

2014

Bus Res

121

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract This paper provides an overview of the status quo in socially responsible investing (SRI) literature. We outline motives, history, and current best practice of SRI. We also provide a thorough analysis of a wide set of studies that cover two key topics in this field: the first research objective is to determine the relative performance of SRI vehicles in comparison to their conventional benchmarks. Our metaanalysis shows that most research studies find that socially responsible (SR) investments perform equal to conventional investments, but these findings are challenged by contradictory results from other studies. The second objective is to analyze SR behavior's effects on a company's financial results. We cover the period between 1986 and 2012. This paper provides future researchers with a well-documented and structured overview of the existing literature on SRI, thereby identifying gaps that might be closed by future research. Terms of use: Documents in EconStor may

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“…Benson & Humphrey (2008) find that SRI fund flow is less sensitive to returns than conventional one and that SRI investors are less concerned about returns than conventional ones. Dupré et al (2004) discuss the extension of the Markowitz portfolio model about a quantity measuring sustainability. While all of the references cited above shape the sustainability quantity as deterministic, Dorfleitner et al (2010) introduce the idea of stochastic social returns and incorporate them into the classical portfolio selection.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Even if this is not the standard view in SRI, we feel that it is the most realistic assumption since ex ante one never can say to what extent the good intentions the management of a company has will become reality. Dupré et al (2004) and Dorfleitner et al (2010) use variances and covariances as a measure of risk. Several studies of portfolio theory suggest other risk measures than standard deviation.…”

Section: Literature Reviewmentioning

confidence: 99%

Safety first portfolio choice based on financial and sustainability returns

Dorfleitner

Utz

2012

European Journal of Operational Research

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This paper lays the mathematical foundations of the notion of an investment's sustainability return and investigates three different models of portfolio selection with probabilistic constraints for safety first investors caring about the financial and the sustainability consequences of their investments. The discussion of these chance-constrained programming problems for stochastic and deterministic sustainability returns includes theoretical results especially on the existence of a unique solution under certain conditions, an illustrating example, and a computational time analysis. Furthermore, we conclude that a simple convex combination of financial and sustainability returns -yielding a new univariate decision variable -is not sufficiently general.

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Adding an Ethical Dimension to Portfolio Management

Cited by 17 publications

References 6 publications

Theory of social returns in portfolio choice with application to microfinance

Theory of social returns in portfolio choice with application to microfinance

Ethical requirement and financial interest: a literature review on socially responsible investing

Safety first portfolio choice based on financial and sustainability returns

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