Name
Abstract | ||
|---|---|---|
We explore theoretically and experimentally the general equilibrium price and allocation implications of delegated portfolio management when the investor--manager relationship is nonexclusive. Our theory predicts that competition forces managers to promise portfolios that mimic Arrow--Debreu AD securities, which investors then combine to fit their preferences. A weak version of the capital asset pricing model CAPM obtains, where state prices relative to state probabilities implicit in prices of traded securities will be inversely ranked to aggregate wealth across states. Our experiment broadly corroborates the price and choice predictions of the theory. However, price quality deteriorates when only a few managers attract most of the available wealth. Wealth concentration increases because funds flow toward managers who offer portfolios closer to replicating AD securities as in the theory, but also because funds flow to managers who had better performance in the immediate past an observation unrelated to the theory. This paper was accepted by Jerome Detemple, finance. |
Year | DOI | Venue |
|---|---|---|
2015 | 10.1287/mnsc.2014.1935 | Management Science |
Keywords | Field | DocType |
capm,asset pricing,portfolio management,satisfiability | Economics,Financial economics,Investment theory,Replicating portfolio,Project portfolio management,Microeconomics,Capital asset pricing model,State prices,Experimental finance,Wealth concentration,Arbitrage pricing theory | Journal |
Volume | Issue | ISSN |
61 | 8 | 0025-1909 |
Citations | PageRank | References |
0 | 0.34 | 1 |
Authors | ||
6 | ||
Name | Order | Citations | PageRank |
|---|---|---|---|
| Elena Asparouhova | 1 | 4 | 1.62 |
| Peter Bossaerts | 2 | 24 | 4.29 |
| jernej copic | 3 | 1 | 0.72 |
| brad cornell | 4 | 0 | 0.34 |
| jaksa cvitanic | 5 | 0 | 0.34 |
| debrah meloso | 6 | 0 | 0.34 |