IDEAS home Printed from https://ideas.repec.org/a/rsk/journ2/7959382.html
   My bibliography  Save this article

The impact of greenhouse gas aversion on optimal portfolios

Author

Listed:
  • Anatoly B. Schmidt

Abstract

In this paper, the notion of greenhouse gas aversion (GHGA) is introduced into the mean–variance portfolio framework. GHGA is assumed to be a weighted sum of the portfolio holdings’ greenhouse gas emission intensities. A new portfolio performance measure, the GHGA-tilted Sharpe ratio, is offered for greenhouse-gas-averse investors. While the classical Sharpe ratio may monotonically decrease with growing GHGA, the GHGA-tilted Sharpe ratio has a maximum at intermediate values of GHGA, defining an optimal GHGA-based mean–variance portfolio. The main holdings of such a portfolio represent promising investment leads for socially responsible investors who do not want to abandon the “brown†industries altogether. An example of a GHGA-based mean–variance portfolio formed with the major constituents of the energy sector is discussed.

Suggested Citation

Handle: RePEc:rsk:journ2:7959382
as

Download full text from publisher

File URL: https://www.risk.net/system/files/digital_asset/2024-05/jem_schmidt_web_final.pdf
Download Restriction: no
---><---

More about this item

Statistics

Access and download statistics

Corrections

All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rsk:journ2:7959382. See general information about how to correct material in RePEc.

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

We have no bibliographic references for this item. You can help adding them by using this form .

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Thomas Paine (email available below). General contact details of provider: https://www.risk.net/journal-of-energy-markets .

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.