Journal of Business Ethics

, Volume 140, Issue 2, pp 339–351 | Cite as

Improving Diversification Opportunities for Socially Responsible Investors

  • María del Mar Miralles-Quirós
  • José Luis Miralles-Quirós
Article

Abstract

Socially responsible investment (SRI) has grown enormously and has expanded globally in recent years. It allows SRI investors to reduce their portfolio risk assumptions through international diversification. In this context, the aim of this paper is twofold (i) to examine price and volatility linkages among the most representative SRI indexes for North America, Europe, and Asia-Pacific employing a multivariate approach and (ii) to provide the out-of-sample performance of an optimal portfolio constructed on the basis of time-varying return and volatility forecasts from this specification approach. Our overall results show that using this technique, it is possible to reduce risk and out-perform the naïve rule, which is usually employed in this type of investment. These findings are relevant not only for academics but also for practitioners, especially for professional managers of SRI portfolios.

Keywords

Socially responsible investment International diversification Information transmission Optimal strategy Naïve rule Performance evaluation 

Abbreviations

BEKK

The model proposed by Baba, Engle, Kraft and Kroner

DJSI

Dow Jones Sustainability Indexes

ESG

Environmental, social and governance

GARCH

Generalized autoregressive conditional heteroskedasticity

SAM

Sustainable Asset Management

SR

Sharpe ratio

SRI

Socially responsible investment

VAR

Vector autoregression

JEL Classification

G10 G11 G14 

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Copyright information

© Springer Science+Business Media Dordrecht 2015

Authors and Affiliations

  1. 1.Department of Financial EconomicsUniversity of ExtremaduraBadajozSpain

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