A Game-Theoretical Integrated Approach for Sustainable Portfolio Selection: An Application on BIST Participation Sustainability Index Stocks

Abstract

Sustainable investment is a hot topic of portfolio selection. This study aims to examine sustainable portfolio selection for conservative investors. Thus, we propose a two-stage hybrid approach based on two-player zero-sum games. In the first stage, we use a fuzzy multi-criteria decision making (MCDM) approach to calculate the sustainability scores of the stocks based on expert knowledge. In the second stage, we form and solve a linear optimization problem by only adding a sustainability constraint to Young’s minimax portfolio selection model. We illustrate the hybrid approach using the weekly simple returns of eight stocks. We also compare our results with the results of Young’s minimax portfolio selection model.