Delegated portfolio management, optimal fee contracts, and asset prices

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Version: Author's accepted manuscript
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Serval ID
serval:BIB_F7F6C0F757D4
Type
Article: article from journal or magazin.
Collection
Publications
Institution
Title
Delegated portfolio management, optimal fee contracts, and asset prices
Journal
Journal of Economic Theory
Author(s)
Sato  Y.
ISSN
0022-0531
Publication state
Published
Issued date
09/2016
Peer-reviewed
Oui
Volume
165
Pages
360-389
Language
english
Abstract
This paper proposes a model of asset-market equilibrium with portfolio delegation and optimal fee contracts. Fund managers and investors strategically interact to determine funds' investment profiles, while they share portfolio risk through fee contracts. In equilibrium, their investment decisions, fee schedules, and stock price feed back into one another. The model predicts that (1) stock market's expected return and volatility increase as more investor capital is intermediated by funds, (2) fund's expense ratio is stable despite volatile market, (3) aggregate fund flow is positively (inversely) related to subsequent (past) market return, and (4) funds provide investors with a volatility hedge by adjusting market exposure counter-cyclically.
Keywords
Portfolio delegation, Optimal fee, Asset prices, Price volatility, Fund size, Fund return
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Create date
18/05/2016 2:21
Last modification date
20/08/2019 16:24
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