<p>This study examines the strategic integration of green assets into investment portfolios, particularly composed of environmentally harmful cryptocurrencies such as Bitcoin and Litecoin. To enhance the sustainability and performance of these portfolios, three categories of green assets were gradually incorporated: Green Bonds, Green Electricity, and the MSCI World Green Building Index. Optimal portfolio weights were determined using genetic algorithms, with green assets ultimately comprising between 42 and 57% of the mixed portfolios. Stochastic dominance analysis demonstrated that these green-augmented portfolios significantly outperformed the original crypto-only portfolio at both second and third order levels. The results highlight the effectiveness of green diversification as a means to achieve competitive financial returns while shifting portfolio exposure toward environmentally oriented financial assets, offering a promising strategy for investors seeking to incorporate environmental considerations into cryptocurrency investments without compromising performance.</p>

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Optimizing polluting portfolios with green assets: a stochastic dominance analysis

  • Nadia Belkhir,
  • Hana Belhadj

摘要

This study examines the strategic integration of green assets into investment portfolios, particularly composed of environmentally harmful cryptocurrencies such as Bitcoin and Litecoin. To enhance the sustainability and performance of these portfolios, three categories of green assets were gradually incorporated: Green Bonds, Green Electricity, and the MSCI World Green Building Index. Optimal portfolio weights were determined using genetic algorithms, with green assets ultimately comprising between 42 and 57% of the mixed portfolios. Stochastic dominance analysis demonstrated that these green-augmented portfolios significantly outperformed the original crypto-only portfolio at both second and third order levels. The results highlight the effectiveness of green diversification as a means to achieve competitive financial returns while shifting portfolio exposure toward environmentally oriented financial assets, offering a promising strategy for investors seeking to incorporate environmental considerations into cryptocurrency investments without compromising performance.