A Note on the Role of Social Impact Investments in Minimum Variance Portfolios

Massimo Biasin, ,Roy Cerqueti,Luca Riccetti,Emanuela Giacomini,Anna Grazia Quaranta,Granem, Université D’angers, 49035 Angers, France ,Nicoletta Marinelli

doi:10.54175/hsustain1010002

Abstract

This paper explores a possible way in which strategic asset allocation decision-making processes can suitably exploit Social Impact Investments (SIIs). We focus on the role that SIIs play in the context of variance-minimizing investments. To this aim, we employ an index that tracks companies' financial performance. A hand-collected sample of Social Impact Firms (SIFs) is the basis of the empirical experiments. Our results point out that, on average, investors should invest a relevant fraction of their wealth in stocks of SIFs.

Highlights

During the last decades, the notion of “doing well and doing good” has become an attractive proposition for private and institutional investors
We consider the daily returns for the three international indexes previously introduced (MGGBI, All Country World Index (ACWI), and SIFSI) for the reported period
This paper contributes to the literature that investigates how social impact investments can be drivers of asset allocation by assessing its role in minimum risk portfolios

Summary

Introduction

The notion of “doing well and doing good” has become an attractive proposition for private and institutional investors. The dramatic decline of global stock market capitalization indices during the 2007–2008 financial crisis had come with unseen volatility that was several times higher in the end of 2008 compared to historical figures Such a turbulent situation greatly decreased investors’ appetite for risk and forced market participants to seek for defensive strategies that are less vulnerable to the market turmoil. To the best of our knowledge, this is the first paper that evaluates the role of SIIs in minimum risk portfolios We contribute to this literature by showing that investors with a low appetite for risk should invest in stocks of SIFs as long as their aim is to obtain the minimum variance portfolio.

Data and Methodology

Empirical Results

Conclusions

The Impact Investing Market in the COVID-19 Context