Abstract
This study introduces three extensions of the Markowitz portfolio selection model: (1) matching portfolio risk to individual investors’ risk appetite; (2) excluding certain shares; and (3) environmental, social, and governance (ESG) integration. The models are compared to the traditional Markowitz model using empirical data from JSE Limited. The findings reveal that differentiating portfolios on the basis of risk appetites or exclusions had a limited impact on future returns. However, portfolios differentiated by ESG integration showed significantly higher future returns than the other models or industry investments. The study highlights the superiority of ESG integration and suggests that current portfolio selection models do not fully capture the art of investing.
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