Portfolio instability and socially responsible investment: Experiments with financial professionals and students - INRAE - Institut national de recherche pour l’agriculture, l’alimentation et l’environnement Access content directly
Journal Articles Journal of Economic Dynamics and Control Year : 2023

Portfolio instability and socially responsible investment: Experiments with financial professionals and students

Abstract

fficiency of SRI portfolios is commonly assessed based on an inconclusive risk-return ratio. We propose to approach the efficiency of portfolios with the notion of instability. Unstable portfolios are characterized by higher transaction costs and human resources costs that justify search for more stable portfolios. We examine the instability of SRI portfolios from the perspective of behavioral finance. Based on data from incentivized experiments with 153 financial professionals and 233 students, we compare a baseline treatment to a ranking treatment in which participants received feedback regarding their average investment in SRI assets. We found that SRI portfolios had significantly lower instability: portfolios with a majority of SRI shares exhibited less instability in both treatments compared to conventional portfolios. Moreover, in the ranking treatment subjects invested more in SRI assets than in the baseline. In addition, the experiment revealed the convergence of professionals’ and students’ behavioral patterns.
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Dates and versions

hal-04168199 , version 1 (21-07-2023)

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Olga Tatarnikova, Sébastien Duchêne, Patrick Sentis, Marc Willinger. Portfolio instability and socially responsible investment: Experiments with financial professionals and students. Journal of Economic Dynamics and Control, 2023, 153, pp.104702. ⟨10.1016/j.jedc.2023.104702⟩. ⟨hal-04168199⟩
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