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Equilibrium implications of delegated asset management under benchmarking


Leippold, Markus; Rohner, Philippe (2012). Equilibrium implications of delegated asset management under benchmarking. Review of Finance, 16(4):935-984.

Abstract

Despite the enormous growth of the asset management industry during the pastdecades, little is known so far about the asset pricing implications of investmentintermediaries. Investment objectives of professional asset managers such as mutualfunds differ from those of private households. However, standard models of invest-ment theory do not address the distinction between direct investing and delegatedinvesting. Our objective is to get a formal understanding of equilibrium implica-tions of delegated asset management. In a model with endogenous delegation, we¯nd that delegation under benchmarking leads to more informative prices, to a betaadjustment, and to signi¯cantly lower equity premia.

Abstract

Despite the enormous growth of the asset management industry during the pastdecades, little is known so far about the asset pricing implications of investmentintermediaries. Investment objectives of professional asset managers such as mutualfunds differ from those of private households. However, standard models of invest-ment theory do not address the distinction between direct investing and delegatedinvesting. Our objective is to get a formal understanding of equilibrium implica-tions of delegated asset management. In a model with endogenous delegation, we¯nd that delegation under benchmarking leads to more informative prices, to a betaadjustment, and to signi¯cantly lower equity premia.

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Citations

2 citations in Web of Science®
2 citations in Scopus®
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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Language:English
Date:2012
Deposited On:11 Apr 2013 09:16
Last Modified:05 Apr 2016 16:28
Publisher:Oxford University Press
ISSN:1572-3097
Publisher DOI:https://doi.org/10.1093/rof/rfq036
Official URL:http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1305029
Other Identification Number:merlin-id:4464

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