On outperforming social-screening-indexing by multiple-objective portfolio selection

摘要

Socially responsible investment has been rapidly growing over the past two decades and is typically fulfilled by screening and indexing. Recently, scholars propose multiple-objective portfolio selection for corporate social responsibility (CSR). The proposal raises the question whether multiple-objective portfolio selection can outperform screening and indexing. The question is not fully answered although researchers have made some encouraging trial. By formulating multiple-objective portfolio selection for CSR, I propose a theorem to demonstrate that investors can outperform screening and indexing in expected CSR with identical or better expected return and with identical variance, and can outperform screening and indexing in expected return with identical or better expected CSR and with identical variance. I empirically test the outperformance by component stocks of Dow Jones Industrial Average and report the results.