Fund tournaments and asset bubbles
Details
State: Public
Version: Author's accepted manuscript
License: Not specified
Serval ID
serval:BIB_4710529E1D6D
Type
Article: article from journal or magazin.
Collection
Publications
Institution
Title
Fund tournaments and asset bubbles
Journal
Review of Finance
ISSN
1572-3097
Publication state
Published
Issued date
07/2016
Peer-reviewed
Oui
Volume
20
Number
4
Pages
1383-1426
Language
english
Abstract
This paper studies how fund managers' relative-performance concerns affect their investment strategies in bubble periods. The managers compete for flows that are sensitive to their performance ranking. Severe ranking tournaments with highly convex flow-performance relationship lead managers to ride bubbles to outperform each other, making bubbles long-lived. However, moderate tournaments may lead them to attack bubbles quickly. The results are consistent with the observed cross-sectional variation in funds' investment strategies in bubble periods. Bubble-riding behavior is pronounced if the funds' tournament is too close to call, as interim followers try to catch up while interim leaders try to stay ahead.
Keywords
Mutual funds, Risk-taking, Incentives, Industry, Markets
Web of science
Publisher's website
Create date
04/09/2015 13:16
Last modification date
20/08/2019 14:53