José Manuel Nogueira

This study focuses on assets related to Sustainable Development Goals (SDGs), which are the most recent aspect of the Socially Responsible Investment framework and have caught the attention of investors due to their investment opportunities as well as the global challenges that can be achieved. The profitability of developing an investment strategy is shown based on the value of the alphas obtained from the estimation of the Fama-French five-factor model when compared to an equally weighted portfolio, even when transaction costs are taken into consideration. In addition, it is proven that investors should focus their investments on two main SDGs: Good health and well-being (Goal 3) and Industry, innovation and infrastructure (Goal 9).

Socially responsible investment has acquired a global dimension beyond moral values, which includes sustainability, risk management, and corporate social responsibility as the main elements. At the same time, from the launch of the 17 Sustainable Development Goals (SDGs) included in the United Nations 2030 Agenda, with its 169 outcomes and 230 indicators, investors are being asked to contribute with their business activities, asset allocations, and investment decisions to solve some of the most urgent problems the world is facing (poverty, clean water, clean energy, decent work and economic growth, and climate action among others). The aim of our research is to analyze the benefits of adding SDGs exchange‐traded funds (ETFs) to a stock–bond portfolio and evaluate the out‐of‐sample performance of four strategies using the returns and volatility forecasts from a rolling sample approach. Our results show that it is possible for investors to obtain benefits from investing in ETFs, which track companies focused on contributing to the SDGs, especially those focused on decent work and economic growth and clear improvements in portfolio performance compared with the initial stock–bond portfolio. These findings are relevant not only for academics but also for active professional managers who can use this technique to add value to investment strategies.

The aim of our research is to analyse the benefits for the U.S. investors of combining their domestic exchange trade fund (ETF) with ETFs, which track other developed markets such as the United Kingdom, Japan, Germany, and France. We evaluate the out‐of‐sample performance of six strategies using the returns and volatility forecasts from a VAR Asymmetric Dynamic Conditional Correlation GARCH approach where returns standardized by range‐based volatility estimators were used as endogenous variables. The initial outperformances of some strategies using classic returns were significantly improved when returns were standardized by the Garman–Klass precise volatility estimator. Additionally, we find a large decrease in the weights of the North American ETF in the best performing strategies, meaning that it is possible to obtain benefits from diversification. These findings are relevant not only for academics but also for active professional managers who can use this technique to add value to their international diversification strategies.