Franklin

Delegated Portfolio Management, Benchmarking, and the Effects on Financial Markets [electronic resource] Igan, Deniz.

Author/Creator:
Igan, Deniz.
Publication:
Washington, D.C. : International Monetary Fund, 2015.
Format/Description:
Government document
Book
1 online resource (39 p.)
Series:
IMF eLibrary
IMF Working Papers: Working Paper No. 15/198
Status/Location:
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Local subjects:
Asset management. (search)
Contagion. (search)
Delegated portfolio management. (search)
Econometric models. (search)
Financial markets. (search)
Home bias. (search)
Informativeness. (search)
Investment. (search)
Liquidity. (search)
Mutual funds. (search)
Other Private Financial Institutions. (search)
Pension Funds. (search)
Portfolio Choice. (search)
Return on investment. (search)
Summary:
We analyze the implications of linking the compensation of fund managers to the return of their portfolio relative to that of a benchmark--a common solution to the agency problem in delegated portfolio management. In the presence of such relativeperformance- based objectives, investors have reduced expected utility but markets are typically more informative and deeper. Furthermore, in a multiple asset/market framework we show that (i) relative performance concerns lead to an increase in the correlation between markets (financial contagion); (ii) benchmark inclusion increases price volatility; (iii) home bias emerges as a rational outcome. When information is costly, information acquisition is hindered and this attenuates the effects on informativeness and depth of the market.
Notes:
Description based on print version record.
Contributor:
Igan, Deniz.
Pinheiro, Marcelo .
Other format:
Print Version:
ISBN:
1513586874
9781513586878
ISSN:
1018-5941
Publisher Number:
10.5089/9781513586878.001
Access Restriction:
Restricted for use by site license.