Does green improve portfolio optimisation?

Journal article

Akhtaruzzaman, Md, Banerjee, Ameet Kumar, Boubaker, Sabri and Moussa, Faten. (2023). Does green improve portfolio optimisation? Energy Economics. 124, pp. 1-10. https://doi.org/10.1016/j.eneco.2023.106831
AuthorsAkhtaruzzaman, Md, Banerjee, Ameet Kumar, Boubaker, Sabri and Moussa, Faten
Abstract

Our study uses the GARCH-EVT-copula model to develop out-of-sample forecasts for diverse asset classes, including a green asset. To construct optimal portfolios, we apply four different portfolio allocation techniques: equal weighting, minimum variance, global minimum variance (GMV), and certainty equivalence tangency (CET) criteria. The results demonstrate that the GMV portfolio outperforms other portfolios in risk measures. Further, backtesting evidence shows that the portfolio containing a green asset performs better than the benchmark for short horizons. The results have implications for fund managers and policymakers since green asset provides valuable diversification benefits and further the cause of sustainable development.

Keywordsgreen finance; greenness; social development goals (SDGs); green asset; CVaR; VaR; portfolio optimisation
Year01 Jan 2023
JournalEnergy Economics
Journal citation124, pp. 1-10
PublisherElsevier Science BV
ISSN0140-9883
Digital Object Identifier (DOI)https://doi.org/10.1016/j.eneco.2023.106831
Web address (URL)https://www.sciencedirect.com/science/article/pii/S0140988323003298?via%3Dihub
Open accessPublished as ‘gold’ (paid) open access
Research or scholarlyResearch
Page range1-10
Publisher's version
License
File Access Level
Open
Output statusPublished
Publication dates
Online04 Jul 2023
Publication process dates
Accepted20 Jun 2023
Deposited06 Jun 2024
Additional information

© 2023 The Authors. Published by Elsevier B.V.

This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/bync-nd/4.0/).

Supplementary data files available as Appendix B via the article web address

Place of publicationNetherlands
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