A novel regret-rejoice cross-efficiency approach for energy stock portfolio optimization

Abstract

As climate change intensifies, more and more people realize that it is necessary and urgent to optimize energy structure through constructing energy asset portfolios. However, most of existing literature on energy asset portfolio models neglects real market restrictions, and the related portfolio performance evaluation approaches ignore the impact of the psychological factors of decision makers (DMs) on evaluation results, which limit their applications. To overcome these limitations, we first present a mean-WMCVaR (MWMC) model for energy stock portfolio selection with real features. Then, we employ the proposed MWMC model and its closely related works to yield a set of investment schemes and determine their characteristic index values including mean, WMCVaR, carbon intensity and ESG. Subsequently, we present a novel regret-rejoice cross-efficiency (NRRCE) approach to evaluate the performance of these investment schemes, and then make a comparison with the ones of the other seven competitive evaluation approaches by using an empirical example. Empirical results show that the proposed MWMC model can yield an optimal investment scheme with a better trade-off between economic and ecological benefits, and our NRRCE approach can effectively provide reasonable and reliable evaluation results for different investment schemes.