Offsetting the implicit incentives: Benefits of benchmarking in money management |
| |
Authors: | Suleyman Basak Anna Pavlova Alexander Shapiro |
| |
Institution: | 1. London Business School and CEPR, Regents Park, London NW1 4SA, United Kingdom;2. Stern School of Business, New York University, United States |
| |
Abstract: | Money managers are rewarded for increasing the value of assets under management. This gives a manager an implicit incentive to exploit the well-documented positive fund-flows to relative-performance relationship by manipulating her risk exposure. The misaligned incentives create potentially significant deviations of the manager’s policy from that desired by fund investors. In the context of a familiar continuous-time portfolio choice model, we demonstrate how a simple risk management practice that accounts for benchmarking can ameliorate the adverse effects of managerial incentives. Our results contrast with the conventional view that benchmarking a fund manager is not in the best interest of investors. |
| |
Keywords: | G11 G20 D60 D81 |
本文献已被 ScienceDirect 等数据库收录! |
|