Hidden Bibliographic Details
| Other authors / contributors: | Pinheiro, Marcelo de Albuquerque, 1974- author.
International Monetary Fund. Research Department.
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| ISBN: | 1513586874
9781513586878
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| ISSN: | 1018-5941
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| Notes: | "September 2015."
"Research Department."
Includes bibliographical references (pages 25-27).
Online resource; title from pdf title page (IMF.org Web site, viewed September 15, 2015).
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| Summary: | We analyze the implications of linking the compensation of fund managers to the return of their portfolio relative to that of a benchmark---a common solution to the agency problem in delegated portfolio management. In the presence of such relative performance- based objectives, investors have reduced expected utility but markets are typically more informative and deeper. Furthermore, in a multiple asset/market framework we show that (i) relative performance concerns lead to an increase in the correlation between markets (financial contagion); (ii) benchmark inclusion increases price volatility; (iii) home bias emerges as a rational outcome. When information is costly, information acquisition is hindered and this attenuates the effects on informativeness and depth of the market.--Abstract.
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| Standard no.: | 10.5089/9781513586878.001
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