Risk-based strategies: the social responsibility of investment universes does matter

Philippe Bertrand (1, 2, 3) , Vincent Lapointe (2)

1 CERGAM - Centre d'Études et de Recherche en Gestion d'Aix-Marseille
2 AMSE - Aix-Marseille Sciences Economiques
3 KEDGE Business School [Marseille]

In this article we extend the research on risk-based asset allocation strategies by exploring how using an SRI universe modifies properties of risk-based portfolios. We focus on four risk-based asset allocation strategies: the equally weighted, the most diversified portfolio, the minimum variance and the equal risk contribution. Using different estimators of the matrix of covariances, we apply these strategies to the EuroStoxx universe of stocks, the Advanced Sustainability Performance Index (ASPI) and the complement of the ASPI in the EuroStoxx universe from March 15, 2002 to May 1, 2012. We observe several impacts but one is particularly important in our mind. We observe that risk-based asset allocation strategies built on the entire universe, concentrate their solution on non-SRI stocks. Such risk-based portfolios are therefore under-weighted in socially responsible firms.

Keywords: Robust covariances matrix; Performance; Operation Research/Decision Theory; Diversification; Theory of Computation; Socially responsible investment; Alternative and risk-based strategies; Combinatorics; Turnover

Domains: Humanities and Social Sciences; Humanities and Social Sciences; Economics and Finance

Philippe Bertrand, Vincent Lapointe. Risk-based strategies: the social responsibility of investment universes does matter. Annals of Operations Research, 2018, 262 (2), pp.413-429. ⟨10.1007/s10479-015-2081-4⟩. ⟨hal-01457390⟩