Risk-Based Strategies: The Social Responsibility of Investment Universes Does Matter

15 Pages Posted: 21 Apr 2013 Last revised: 27 Oct 2016

See all articles by Philippe Bertrand

Philippe Bertrand

AMGSM-IAE Aix-en-Provence, Aix Marseille University, CERGAM; KEDGE Business School

Vincent Lapointe

Ostrum AM

Date Written: November 1, 2015

Abstract

In this article we extend the research on risk-based asset allocation strategies by exploring how using an SRI universe impacts the properties of risk-based portfolios. We focus on four risk-based asset allocation strategies: the Equally Weighted (EW), the Most Diversified Portfolio (MDP), the Minimum Variance (MV) and the Equal Risk Contribution (ERC). 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 portfolio is therefore under-weighted in socially responsible firms.

Keywords: Socially responsible investment, alternative and risk-based strategies, performance, diversification, turnover, robust covariances matrix

JEL Classification: G11, C58, C60, G32, M14

Suggested Citation

Bertrand, Philippe and Lapointe, Vincent, Risk-Based Strategies: The Social Responsibility of Investment Universes Does Matter (November 1, 2015). Annals of Operation Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2254578 or http://dx.doi.org/10.2139/ssrn.2254578

Philippe Bertrand

AMGSM-IAE Aix-en-Provence, Aix Marseille University, CERGAM ( email )

Chemin de la Quille - Puyricard
Aix en Provence, 13089
France

KEDGE Business School ( email )

Domaine de Luminy - BP 921
BP 921
Marseille, PACA 13288
France

Vincent Lapointe (Contact Author)

Ostrum AM ( email )

Paris
France

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