A new approach for optimizing responsible investments dependently on the initial wealth. Issue 2 (March 2017)

• Record Type: Journal Article
• Authors: Dorfleitner, Gregor; Nguyen, Mai
• Is Part Of: Journal of asset management. Volume 18:Issue 2(2017)
• Page Start: 81
• Page End: 98
• Publication Date: 2017-03
• Subjects: finance -- socially responsible investing -- expected utility theory -- portfolio optimization -- non-financial utility -- G11; Business enterprises -- Finance -- Periodicals; 658.15242
• DOI: 10.1057/s41260-016-0011-x
• Languages: English
• ISSNs: 1470-8272

Abstract

Abstract This article introduces two approaches for modelling the dependency of the optimal portfolio choice on the available amount of investment volume from the perspective of socially responsible investors who seek both financial and ethical benefits. We complement the expected utility framework and the mean-variance portfolio selection model by a sustainability dimension to account for the additional utility that investors derive from the social attribute of the investment. By using a numeric example, we illustrate how the optimal investment choice changes depending on the initial wealth and the investor's appreciation of sustainable and responsible objectives. The applicability of the proposed models is shown by an actual investment case.