Delegated Portfoliomanagement and Rational Prolonged Mispricing  

Oleh:

GOLDMAN, EITAN ; SLEZAK, STEVE L.

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Journal of Finance (EBSCO) vol. 58 no. 1 (Feb. 2003), page 283-311.
Topik: Delegated Portfolio; Management; investment
Fulltext: p 283.pdf (289.2KB)

Isi artikel

This paper examines how information becomes reflected in prices when investment decisions are delegated to fund managers whose tenure may be shorter than the time it takes for their private information to become public. We consider a sequence ofmanagers, where each subsequentmanager inherits the portfolio of their predecessor.We show that the inherited portfolio distorts the subsequent manager’s incentive to trade on long-term information. This allows erroneous past information to persist, causing mispricing similar to a bubble.We investigate the magnitude of the mispricing. In addition, we examine endogenous information quality. In some cases, information quality increases when the manager’s expected tenure decreases.

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