RT Journal Article SR Electronic T1 Forming ESG-Oriented Portfolios: A Popularity Approach JF The Journal of Investing FD Institutional Investor Journals SP 63 OP 75 DO 10.3905/joi.2022.31.4.063 VO 31 IS 4 A1 Thomas M. Idzorek A1 Paul D. Kaplan YR 2022 UL https://pm-research.com/content/31/4/63.abstract AB Key theories of financial economics seem to be at odds with one another and with observed personalized portfolios. The Popularity Asset Pricing Model serves as a unifying theory by allowing for both rational and irrational investors, individual risk and return expectations, a multitude of pecuniary and non-pecuniary characteristics to impact asset prices, and investors to derive utility from non-pecuniary characteristics. The authors develop a benchmark-relative fund-of-funds alpha-tracking error utility function that directly incorporates an investor’s non-pecuniary preferences, including environmental, social, and governance–oriented preferences. Maximizing the utility function leads to a personalized portfolio that tilt toward characteristics that the investor likes and away from characteristics the investor dislikes while maximizing alpha and minimizing tracking error.