Open AccessEthical Stochastic Objectives Programming Approach for Portfolio Selection
Author(s) -
Noushin Bagheri,
Fouad Ben Abdelaziz,
Ananth Rao
Publication year - 2017
Publication title -
international conference on advances in business, management and law
Language(s) - English
Resource type - Journals
ISSN - 2523-6547
DOI - 10.30585/icabml-cp.v1i1.40
Subject(s) - portfolio , actuarial science , modern portfolio theory , stochastic programming , portfolio optimization , sharpe ratio , application portfolio management , post modern portfolio theory , computer science , economics , mathematical optimization , replicating portfolio , project portfolio management , mathematics , financial economics , management , project management
The paper develops an ethical multiple stochastic objectives approach to address the ethical portfolio selection problem in the stochastic environment under the Shari’ah compliant framework. Two random objectives considered in this paper which are maximizing portfolio return and maximizing social welfare of portfolio. The risk of portfolio is measured by covariance matrix of total return. The ethical stochastic objectives program approach is based on goal programming approach, a chance constrained approach and Shari’ah compliant framework. The model is applied on 60 stocks including conventional and Islamic securities in GCC. The results show that, portfolios with higher proportion of ethical Islamic securities in the portfolio and with higher expected loss the higher is the portfolio performance in terms of Sharpe measure.
Keywords: Shari’ah compliant, Ethical investment, Goal programming, Multiple objectives, Stochastic Multiple objectives programming, Chance constrained approach, Sharpe index as portfolio performance measure.