Relative Performance Evaluation Contracts and Asset Market Equilibrium  

Oleh:

Timmermann, Allan ; Kapur, Sandeep

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Economic Journal (EBSCO) vol. 115 no. 506 (Oct. 2005), page 1077-1102.
Topik: Performance; performance contracts; asset market; equilibrium
Fulltext: 1077.pdf (198.49KB)

Ketersediaan

Perpustakaan Pusat (Semanggi) Nomor Panggil: EE28.19 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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Isi artikel

We analyse the equilibrium consequences of performance - based contracts for fund managers. Managerial remuneration is tied to a fund's absolute and relative performance. Investors choose whether or not to delegate their investment to better - informed fund managers ; if they delegate they choose the optimal contract subject to the fund manager's participation constraint. We find that the impact of relative performance evaluation on the equilibrium equity premium and on portfolio herding critically depends on whether the participation constraint is binding. Simple numerical examples suggest that the increased importance of delegation and relative performance evaluation may lower the equity premium.

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