English, Article, Journal or magazine article edition: Career Concerns in Financial Markets Andrea Prat; Amil Dasgupta

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Bookmark: http://trove.nla.gov.au/version/45065
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Career Concerns in Financial Markets
Author
  • Andrea Prat
  • Amil Dasgupta
Physical Description
  • preprint
Notes
  • What are the equilibrium features of a market where a sizeable portion of traders face career concerns? This question is central to our understanding of Þnancial markets that are increasingly dominated by institutional investors. We construct a model of delegated portfolio management that captures key features of the US mutual fund industry and we embed it into an asset pricing set-up. Fund managers differ in their ability to understand market fundamentals, and in every period investors choose a fund. In equilibrium, the presence of career concerns induces uninformed fund managers to churn, i.e. to engage in trading even when they face a negative expected return.  As churning plays the role of noise trading, the asset market displays non-fully informative prices and positive (and high) trading volume.  The equilibrium relationship between fund return and net fund flows displays a skewed shape that is consistent with stylized facts. The robustness of our core results is probed from several angles.
  • RePEc:fmg:fmgdps:dp494
Language
  • English
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