DEA Portfolio Modeling - The Case of Socially Responsible Investing

Stephan Gasser, Margarethe Rammerstorfer, Karl Weinmayer

Publication: Working/Discussion PaperWorking Paper/Preprint

Abstract

In this paper, we expand the literature on multi-criteria portfolio modeling for social responsible investments using multi-directional efficiency analysis (MEA). We apply a positive screening according to MEA efficiency scores, but also exploit the information contained in the efficiency score directly (efficiency-weighting) in order to compute portfolio weights. The broad empirical analysis is based on public equity market data of social responsible investments from the USA going back to 2005. We find that a consideration of a social variable in the MEA improves financial and social performance. The efficiency-weighted portfolios yield superior financial performance compared to the other proposed models. A combination of positive screening and efficiency-weighting leads to the best social performance of all tested models. Overall, all models outperform a normal mean-variance portfolio and also do considerably well compared to the implemented benchmarks in general.
Original languageEnglish
Publication statusPublished - 2018

Austrian Classification of Fields of Science and Technology (ÖFOS)

  • 502010 Public finance

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