Hans Lööf (), Maziar Sahamkhadam () and Andreas Stephan ()
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Hans Lööf: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology
Maziar Sahamkhadam: Linnaeus University
Andreas Stephan: Linnaeus University
Abstract: This paper investigates how optimal portfolios of timber & forestry stocks perform relative to the global S&P timber & forestry index when corporate social responsibility (CSR) is considered. We incorporate CSR in the construction of optimal portfolios by utilizing environmental, social, and governance (ESG) scores. Historical as well as copula-augmented predictive models and ESG-constrained optimization are used to analyze out-of-sample performance of various portfolio strategies over the period 2018-2021. The results of copula-based portfolio strategies are better than of the historical models. Another insight gained by this study is that socially responsible investments in forestry stocks are feasible without sacrificing risk-adjusted returns.
Keywords: portfolio optimization; ESG; forestry stocks; return; risk; vine copula
Language: English
30 pages, February 16, 2022
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