Incentives in Funds Management: A Literature Overview

Bhattacharya, Sudipto; Dasgupta, Amil; Guembel, Alexander; Prat, Andrea

doi:10.1016/b978-044451558-2.50015-5

Cited by 9 publications

(4 citation statements)

References 69 publications

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“…3 However, all these take managers' distorted incentives as given. Two papers more related to ours are Dasgupta and Prat (2008) and Dasgupta, Prat and Verardo (2011) who introduce reputational concerns into a sequential trading model a la Glosten and Milgrom (1985). 4 They show that reputational concerns can lead to excessive trading, slow revelation of information and (if the market maker has market power) biased prices.…”

mentioning

confidence: 99%

Fund Managers, Career Concerns, and Asset Price Volatility

Guerrieri

Kondor²

2012

American Economic Review

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mentioning

confidence: 99%

Fund Managers, Career Concerns, and Asset Price Volatility

Guerrieri

Kondor²

2012

American Economic Review

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“…With respect to speculative investors, our premises are based especially on Froot et al's (1992a, b) theory concerning a behavioural pattern of speculative investors, which has also been labelled 'investigative herding' (e.g. Graham, 1999;Brunnermeier, 2001;Bhattacharya et al, 2008). The investigative herding view assumes that a speculative investor's payoffs from a stock position (e.g.…”

Section: Earlier Literature On the Causes Of Short-termismmentioning

confidence: 99%

“…But in what way? The present view is based on the notion of investigative herding in a specific sense (Froot et al, 1992a, b;Bhattacharya et al, 2008), which suggests that speculative investors tend to converge towards basing their investments on one and the same information variable (or variables). Namely, if speculative investors are to profit from an investment they make today by selling it in the near future for a higher price, they must believe that their information about the firm's status on a certain variable is not yet reflected in the firm's stock price but will be reflected in the near future once other investors obtain the same information.…”

Section: Earlier Literature On the Causes Of Short-termismmentioning

confidence: 99%

Explaining corporate short-termism: self-reinforcing processes and biases among investors, the media and corporate managers

Aspara

Pajunen

Tikkanen

et al. 2014

Socio-Economic Review

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Based on the related literature in economics, organizational sociology and the sociology of finance, this article constructs a novel conceptual explanation for corporate short-termism, that is, the tendency of corporate managers to sacrifice long-term investments to improve short-term earnings (STEs). We theorize about how such corporate short-termism emerges, at least partly, from systemic, self-reinforcing processes across various communities of actors including investors, the media and managers themselves. In doing so, we refute the common notion that corporate short-termism is caused by an inherent preference of investors or other actors to focus on STEs. Consequently, the systemic perspective offered by this article questions some conventional assumptions about the roots of corporate short-termism and emphasizes the influence of coordination mechanisms and behavioural biases in giving rise to self-reinforcing loops.

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“…12 See the survey of Bhattacharya et al (2008). 13 However, as explained by Darolles and Gouriéroux (2010), incentive fees may have a positive impact on risk-adjusted performance because the volatility measure is smoothed.…”

Section: Markov Chain Modeling Of Fund Ratingsmentioning

confidence: 99%

Mutual Fund Ratings and Performance Persistence

Hereil¹,

Mitaine²,

Moussavi³

et al. 2010

SSRN Journal

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This paper studies the persistence of mutual fund performance. Academic research often focuses on fund returns, sometimes adjusted for style and market cap biases. Because fund rating systems play a central role in the asset management industry, we consider another approach in this paper. Using a Markov modeling of these ratings, we illustrate that the persistence of the performance is relatively poor with respect to the time horizon of investors. We show that two facts may explain these results. First, the rating system is not necessarily time-homogeneous. Second, the importance of style is crucial when comparing the ratings of mutual funds. However, we show that it is extremely difficult to characterize quantitatively the style of a mutual fund. We conclude that fund selection is more art than science, and that quantitative analysis must be combined with qualitative insight.

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Incentives in Funds Management: A Literature Overview

Cited by 9 publications

References 69 publications

Fund Managers, Career Concerns, and Asset Price Volatility

Fund Managers, Career Concerns, and Asset Price Volatility

Explaining corporate short-termism: self-reinforcing processes and biases among investors, the media and corporate managers

Mutual Fund Ratings and Performance Persistence

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