Chinese Corporate Social Responsibility by Multiple Objective Portfolio Selection and Genetic Algorithms

In this paper, we study corporate social responsibility (CSR) in China through the prism of investments. We work with large stocks and assess their CSR performance from agency CSR data. We formulate Chinese CSR by a multiple objective extension of a traditional portfolio selection model and analytically solve the extension. We also solve the extension by a genetic algorithm and directly evaluate the algorithm's performance against the analytical solution. The multiple objective formulation is tested by randomly choosing nondominated portfolios with out‐of‐sample data to identify nondominated portfolios that outperform the 1/n portfolio (equally weighted portfolio). Copyright © 2013 John Wiley & Sons, Ltd.