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Multi-criteria decision making for choosing socially responsible investment within a behavioral portfolio theory framework: a new way of investing into a crisis environment

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Abstract

The current economic crisis fuels the financial social responsibility after an epoch of many excesses with damaging effects. This work tackles two emerging streams in the financial literature: the behavioral portfolio theory with mental accounting and the socially responsible investment (SRI). Promoting SRI is regarded by a lot of financial experts, policymakers and researchers from the field of economic and social sciences, as one of the potential solutions in order to avoid future crises. Therefore, new models for this investment approach are necessary. We try to support the class of investors that select their investments under a mental accounting framework and also they want to achieve a certain level of SR quality in their portfolios. In order to reconcile the two choice frames, avoiding unnecessary sacrifices in financial performance, we have designed a model based on goal programming that integrates the two cornerstones of the investor. Furthermore, we propose a fuzzy inference system to determine the amount of money allocated to each mental account as well as the confidence level assigned to each mental account. This tool is based on expert knowledge modeled by fuzzy if–then rules.

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Notes

  1. This issue has been suggested by an anonymous referee of this paper. The authors greatly appreciate his/her thoughtful comment.

  2. Using MATLAB R2013.

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Acknowledgments

We would like to thank the anonymous referees and the Editor for their valuable comments and suggestions. The authors wish to gratefully acknowledge the financial support provided by the Spanish Ministry of Education, Project ECO2011-26499.

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Authors and Affiliations

  1. Department of Quantitative Economics, University of Oviedo, Oviedo, Spain

    Amelia Bilbao-Terol & Mar Arenas-Parra

  2. Department of Economics, University of Oviedo, Oviedo, Spain

    Verónica Cañal-Fernández & Celia Bilbao-Terol

Authors
  1. Amelia Bilbao-Terol
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  2. Mar Arenas-Parra
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  3. Verónica Cañal-Fernández
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  4. Celia Bilbao-Terol
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Correspondence to Amelia Bilbao-Terol.

Appendix

Appendix

See Figs. 8, 9, 10, 11 and Table 7.

Fig. 8
figure 8

Membership functions for risk tolerance

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Fig. 9
figure 9

Membership functions for MAs

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Fig. 10
figure 10

Results of aggressive FIS

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Fig. 11
figure 11

Results of FIS for confidence levels

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Table 7 Efficient frontier for \(\textit{MA}_1 (\alpha =0.91), \textit{MA}_2 (\alpha =0.8)\) and \(\textit{MA}_3 (\alpha =0.7)\)
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Bilbao-Terol, A., Arenas-Parra, M., Cañal-Fernández, V. et al. Multi-criteria decision making for choosing socially responsible investment within a behavioral portfolio theory framework: a new way of investing into a crisis environment. Ann Oper Res 247, 549–580 (2016). https://doi.org/10.1007/s10479-015-1947-9

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