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Journal of Asset Management

, Volume 18, Issue 2, pp 81–98 | Cite as

A new approach for optimizing responsible investments dependently on the initial wealth

  • Gregor DorfleitnerEmail author
  • Mai Nguyen
Original Article

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.

Keywords

finance socially responsible investing expected utility theory portfolio optimization non-financial utility 

JEL Classification

G11 

Notes

Acknowledgements

We thank an anonymous referee for valuable suggestions and the Fritz Thyssen Stiftung, which provided financial support for the project ‘Spezielle Aspekte der Berücksichtigung von Nachhaltigkeit in der Anlageentscheidung’.

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Copyright information

© Macmillan Publishers Ltd 2016

Authors and Affiliations

  1. 1.Department of FinanceUniversity of RegensburgRegensburgGermany

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