Sin versus green investment: A retrospective study on investor choice during pre- and through COVID regime
ISSN: 0307-4358
Article publication date: 12 April 2023
Issue publication date: 29 August 2023
Abstract
Purpose
Increasing focus on socially responsible investments (SRIs) and green projects in recent times, coupled with the arrival of COVID pandemic, are the main drivers of this study. The authors conduct a post-factum analysis of investor choice between sin and green investments before and through the COVID outbreak.
Design/methodology/approach
A passive investor is introduced who seeks maximum risk-adjusted return and/or investment variance. When presented an opportunity to add sin and/or green investments to her initial one-asset market-only investment position, she views and handles this issue as a portfolio problem (MPT). She estimates value-at-risk (VaR) and conditional-value-at-risk (CVaR) for portfolios to account for downside risk.
Findings
Green investments offer better overall risk-return optimization in spite of major inter-period differences in return-risk dynamics and substantial downside risk. Portfolios optimized for minimum variance perform just as well as the ones optimized for minimum downside risk. Return and risk have settled at higher levels since the onset of COVID, resulting in shifting the efficient frontier towards north-east in the return-risk space.
Originality/value
The study contributes to the literature in two ways: One, it examines investor choice between sin and green investments during a global health emergency and views this choice against the one made during normal times. Two, instead of using the principles of modern portfolio theory (MPT) explicitly for diversification, the study uses them to identify investor preference for one over the other investment type. This has not been widely done thus far.
Keywords
Acknowledgements
Corrigendum: It has come to the attention of the publisher that the article: Bhatnagar, C.S., Bhatnagar, D. and Bhullar, P.S. (2023), “Sin versus green investment: A retrospective study on investor choice during pre- and through COVID regime”, Managerial Finance, Vol. 49 No. 9, pp. 1474-1501. https://doi.org/10.1108/MF-10-2022-0477 did not include Vineeta Kumari as an author.
At the request of the authors, Vineeta Kumari has been added as an author of this article.
Citation
Bhatnagar, C.S., Bhatnagar, D., Kumari, V. and Bhullar, P.S. (2023), "Sin versus green investment: A retrospective study on investor choice during pre- and through COVID regime", Managerial Finance, Vol. 49 No. 9, pp. 1474-1501. https://doi.org/10.1108/MF-10-2022-0477
Publisher
:Emerald Publishing Limited
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