Download or read book Essays on Delegated Portfolio Management and Optimal Contracting written by Raymond Chi Wai Leung and published by . This book was released on 2016 with total page 234 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation is a compilation of three papers that investigate the role of optimal contracting in a delegated portfolio management setting. While the study of optimal contracts in classical principal-agent setup has been extensively studied, relatively few have been studied in the context of delegated portfolio management in finance. And even delegated portfolio management papers in finance, there are still several open questions and unresolved issues that are beyond the scope of a standard principal-agent problem. In Chapter 1, I study a continuous-time principal-agent problem with drift and stochastic volatility control. While the problem with drift-only control by an agent has been extensively studied recently, very few existing papers allow an agent to endogenously influence volatility. Endogenous volatility control is particularly important in delegated portfolio management settings as volatility is one of the defining aspects of modern financial portfolio management. In Chapter 2, I study a model that encompasses dynamic agency, delegated portfolio management and asset pricing. Traditionally, the fields of ``asset pricing'' and ``corporate finance'' are studied independently of each other. However, as the modern portfolio management industry blooms in size and influence, the role of the portfolio manager and the contracts that are extended to them arguably has a role in the securities that they invest in, and hence in equilibrium, the asset pricing implications of the market overall. This paper is an attempt to bridge ``asset pricing'' and ``corporate finance'' (specifically interpreted to mean delegated portfolio management contracting) into one. In Chapter 3, I study whether a principal investor is better off delegating most of his money to a single portfolio manager (centralized delegation), as opposed to multiple portfolio managers (decentralized delegation), especially when there is the possible presence of moral hazard. With the size of the hedge fund industry and growing empirical support that moral hazard is a growing risk among hedge fund managers, it becomes imperative to understand when an investor decides to delegate his money, should it be delegated in a more centralized or decentralized fashion.

Download or read book Two Essays in Analyzing Delegated Portfolio Management Relationships Through Relative Portfolio Measures written by David L. Stowe and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In my first essay, I demonstrate how the Cremers and Petajisto (2009) Active Share measure can be re-parameterized into the standard portfolio parameters we typically see in other portfolio management studies, namely betas and standard deviations. This demonstrates that Active Share is not very different than the measures we traditionally use to study portfolio management. One of the parameters that results from the re-parameterization is a measure of the risk of the manager's active bets, the volatility of the implied hedge position relative to the benchmark. This parameter is equally as strong as Active Share in predicting excess performance and helps give a better economic understanding of why Active Share exhibits predictive power. Active Share and this implied hedge measure are like a confidence and information problem. In my second essay, I use the idea of benchmark relative investment optimization as outlined in Roll (1992). These portfolios are sub-optimal but they can be better than the alternative, i.e., better than the portfolios that the principals could build themselves. I outline the conditions under which delegated managers increase the principal's utility. Additionally, if implemented properly, tracking error constraints, Jorion (2003) and beta constraints, Roll (1992), can force the delegated manager to buy a more efficient portfolio than the benchmark. Thus, even though relative utility maximization is sub-optimal, if the delegated manager is more skillful than the principal in portfolio construction, delegated portfolio management is still likely preferred to naively holding the benchmark.

Download or read book Essays on Delegated Portfolio Management written by Bernhard Silli and published by . This book was released on 2009 with total page 140 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Delegated Portfolio Management written by Zhigang Qiu and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Three Essays on Delegated Portfolio Management written by Nataliya Gerasimova and published by . This book was released on 2017 with total page 146 pages. Available in PDF, EPUB and Kindle. Book excerpt: Thèse. HEC. 2017

Download or read book Essays in Delegated Portfolio Management written by Niklas Hüther and published by . This book was released on 2014 with total page 131 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Delegated Portfolio Management and Trade on Differential Information written by Alexander Gümbel and published by . This book was released on 1999 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Delegated Portfolio Management and Asset Prices written by Yūki Satō and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Delegated Portfolio Management written by Sitikantha Parida and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis contains three essays on delegated portfolio management and deals with issues such as impact of regulations on mutual fund performance, impact of competition on transparency in financial markets and strategic trading behaviour of agents in illiquid markets. Chapter 1 analyses the impact of more frequent portfolio disclosure on mutual funds performance. Since 2004, SEC requires all U.S. mutual funds to disclose their portfolio holdings on a quarterly basis from semi-annual previously. This change in regulation provides a natural setting to study the impact of disclosure frequency on the performance of mutual funds. Prior to the policy change, it finds that the semi-annual funds with high abnormal returns in the past year outperform the corresponding quarterly funds by 17-20 basis points a month. This difference in performance disappears after 2004. The reduction in performance is higher for semi-annual funds holding illiquid assets than those holding liquid assets. These results support the hypothesis that performance of funds with more disclosure suffers more from activities such as front running. Chapter 2 analyses the impact of competition in financial markets on incentives to re- veal information. It finds that discretionary portfolio disclosure and advertising expenses of mutual funds decrease with competition. This supports the theory that mutual funds use portfolio disclosure and advertising as marketing tools to attract new investments in a financial market, where superior relative performance and greater visibility are rewarded with convex payoffs. With higher competition, the likelihood of landing new investments goes down for each fund while the cost of disclosure goes up. Funds respond by cutting down on costly disclosures and advertising activities. Thus competition seems to have adverse impact on market transparency and search cost. 3Chapter 3 develops a model of strategic trading to study forced liquidation. Traders who hold an illiquid risky security have to satisfy minimum capital requirements, or liquidate their position. Therefore, traders with price impact can induce the fire sale of others to benefit from future low prices. It shows that if traders have similar proportions of wealth invested in the risky security, or the market is sufficiently liquid, they behave cooperatively and smooth their orders over several trading periods. However, if the proportions are significantly different across agents, and market liquidity is low, the strong agent, who is less exposed to the risky asset, predates on the weak agent, and forces her to exit the market.

Download or read book Essays in Delegated Portfolio Management written by Ioanna Papastaikoudi and published by . This book was released on 2004 with total page 290 pages. Available in PDF, EPUB and Kindle. Book excerpt: (Cont.) is reversed because of the high costs of liquidations when unexpectedly unwinding the positions. The third chapter is joint work with Ilan Guedj. We examine whether mutual fund families affect the performance of the funds they manage. From a sample of funds belonging only to large families we find that last year's best performing funds outperform last year's worst performing funds by 58 basis points. We also show that there exists persistence of performance of these funds inside their respective families. Supporting these findings, we also show that the better performing funds in a family have a higher probability of being allocated more managers, one of the main resources available. This is consistent with the view that fund families allocate resources in proportion to fund performance and not fund needs.

Download or read book Essays on Market Efficiency and Delegated Portfolio Management written by Philipp Doering and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Delegated Portfolio Management Optimal Fee Contracts and Asset Prices written by Yuki Sato and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Dynamic Agency Delegated Portfolio Management and Asset Pricing written by Raymond C. W. Leung and published by . This book was released on 2014 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study a dynamic contracting problem in continuous-time dynamically complete market general equilibrium, whereby an investor must delegate all his portfolio choice problems to a manager. This framework is one of the first attempts to attack a combined dynamic contracting and dynamic asset pricing problem. The portfolio manager can exert costly private monitoring effort costs to increase the expected dividend growth rate of a representative firm. The investor can only observe the dividends of the firm over time, and will consider a pie sharing rule contract over the dividends of consumption goods to dynamically incentivize the manager. The key result is that dynamic moral hazard and dynamic optimal contracting endogenously generates stochastic volatility in the asset returns, and substantial state varying stochasticity in the market price of risk and the risk free rate; this is in sharp contrast to an economy without the presence of agency and dynamic contracts where the market price of risk, risk free rate and asset volatility are all constant. Our results raise the question whether a traditionally viewed "idiosyncratic" risk, namely incentives and compensation contracts of fund managers, are priced in that they do affect asset pricing in equilibrium.

Download or read book Essays on Dynamic Contracts written by Swagata Bhattacharjee and published by . This book was released on 2016 with total page 420 pages. Available in PDF, EPUB and Kindle. Book excerpt: My dissertation studies the design of contracts in different contexts. It contains two theoretical investigations about contracting under ambiguity: in the context of research partnerships and venture capital financing; and an experimental study to examine delegation of decision rights within organizations. The first chapter studies contract design for innovation under ambiguity. Outsourcing of research is a large and growing trend in knowledge-intensive industries such as the biotechnology and software industries. I model innovation as an ambiguous stochastic process and assume that the commercial firms and research labs differ in their attitude towards ambiguity. I characterize the optimal sequence of short-term contracts and examine how the features of this contract facilitate ambiguity sharing: the dynamic moral hazard problem is mitigated under ambiguity; experimentation stops earlier than is socially optimal; the project may be liquidated even after being granted a patent. I find that redesigning the patent law can not implement the Policymaker’s desired optimum. The second chapter analyzes venture capital investment under ambiguity. A central feature of venture capital financing is the extensive use of control rights as an instrument. In this chapter, I present a model of venture capital financing where investment is allowed to depend on an intermediate ambiguous signal. I show how the presence of ambiguity explains the allocation of control rights if the investor is more ambiguity averse than the entrepreneur. In the third chapter, I discuss how delegation of decision rights can be used as a signal of trust that can be reciprocated by cooperation. First, I theoretically show that in a principal-agent framework, using delegation as a signal is the only Perfect Bayesian Equilibrium that survives forward induction criterion. Then I use experimental methods to test this theoretical prediction. I find that the players do not use delegation very often, thus the forward induction logic is not supported by the observed data. However, once the players are given information about the past sessions, they choose the forward induction equilibrium more often. This suggests that information affects the formation of beliefs and equilibrium selection in Bayesian games.

Download or read book Continuous Time Delegated Portfolio Management with Homogeneous Expectations written by Holger Kraft and published by . This book was released on 2005 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: In a continuous-time framework, the issue of how to delegate an investor's portfolio decision to a portfolio manager is studied. Firstly, we solve the first-best problem where the investor is able to force the manager to implement a certain strategy. For the second-best case, a specific quadratic contract is introduced resolving the agency conflict completely in the sense that the solutions to the first-best and second-best problems coincide. This contract can be implemented if the investor is able to observe the value of the growth optimal portfolio at her investment horizon. Consequently, this portfolio serves as a perfect benchmark. Instead of the quadratic contract, one can also use a contract containing a suitable exchange option. If the investment opportunity set is assumed to be constant, in equilibrium the value of the market portfolio is a sufficient statistic for the value of the growth optimal portfolio. Hence, in this situation, even a portfolio with a constant number of assets (passive index) can replace the growth optimal portfolio in the quadratic contract. Throughout the paper we assume both the investor and the manager to have homogeneous expectations about the investment opportunity set, i.e. both individuals are equally well informed about the parameters of the asset price dynamics. This, however, does not necessarily mean that investor and manager are symmetrically informed about all prices.

Download or read book Essays on Delegated Asset Management written by Fabian Garavito and published by . This book was released on 2010 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Noise Trading Delegated Portfolio Management and Economic Welfare written by James Dow and published by . This book was released on 1994 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider a model of the stock market with delegated portfolio management. All agents are rational: some trade for hedging reasons, some investors optimally contract with portfolio managers who may have stock-picking abilities, and portfolio managers trade optimally given the incentives provided by this contract. Managers try, but sometimes fail, to discover profitable trading opportunities. Although it is best not to trade in this case, their clients cannot distinguish 'actively doing nothing, ' in this sense, from 'simply doing nothing.' Because of this problem: (i) some portfolio managers trade even though they have no reason to prefer one asset to another (noise trade). We also show that, (ii), the amount of such noise trade can be large compared to the amount of hedging volume. Perhaps surprisingly, (iii), noise trade may be Pareto-improving. Noise trade may be viewed as a public good. Results (i) and (ii) are compatible with observed high levels of turnover in securities markets. Result (iii) illustrates some of the possible subtleties of the welfare economics of financial markets.