Mean-Variance stochastic goal programming for sustainable mutual funds' portfolio selection.

Abstract

Mean-Variance Stochastic Goal Programming models (MV-SGP) provide satisficing investment solutions in uncertain contexts. In this work, an MV-SGP model is proposed for portfolio selection which includes goals with regards to traditional and sustainable assets. The proposed approach is based on a two-step procedure. In the first step, sustainability and/or financial screens are applied to a set of assets (mutual funds) previously evaluated with TOPSIS to determine the opportunity set. In a second step, satisficing portfolios of assets are obtained using a Goal Programming approach. Two different goals are considered. The first goal reflects only the purely financial side of the target while the second goal is referred to the sustainable side. Aversion to Risk Absolute (ARA) coefficients are estimated and incorporated in our investment decision making approach using two different approaches.

Keywords

• Mean-Variance portfolio selection model
• TOPSIS; Stochastic Goal Programming; Expected Utility Theory; ARA coefficients; Mutual Funds
• TOPSIS
• Stochastic Goal Programming
• Expected Utility Theory; ARA coefficients
• Expected Utility Theory
• ARA coefficients
• Mutual Funds