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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 past decades, little is known so far about the asset pricing implications of investment intermediaries. Investment objectives of professional asset managers such as mutual funds differ from those of private households. However, standard models of investment theory do not address the distinction between direct investing and delegated investing. Our objective is to get a formal understanding of equilibrium implications of delegated asset management. In a model with endogenous delegation, we find that delegation under benchmarking leads to more informative prices, to a beta adjustment, and to significantly lower equity premia.

Abstract

Despite the enormous growth of the asset management industry during the past decades, little is known so far about the asset pricing implications of investment intermediaries. Investment objectives of professional asset managers such as mutual funds differ from those of private households. However, standard models of investment theory do not address the distinction between direct investing and delegated investing. Our objective is to get a formal understanding of equilibrium implications of delegated asset management. In a model with endogenous delegation, we find that delegation under benchmarking leads to more informative prices, to a beta adjustment, and to significantly lower equity premia.

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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
Scopus Subject Areas:Social Sciences & Humanities > Accounting
Social Sciences & Humanities > Finance
Social Sciences & Humanities > Economics and Econometrics
Language:English
Date:2012
Deposited On:11 Apr 2013 09:16
Last Modified:23 Jan 2022 23:52
Publisher:Oxford University Press
ISSN:1572-3097
OA Status:Closed
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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