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Author: Ms.Deniz Igan Publisher: International Monetary Fund ISBN: 1513586874 Category : Business & Economics Languages : en Pages : 39
Book Description
We analyze the implications of linking the compensation of fund managers to the return of their portfolio relative to that of a benchmark—a common solution to the agency problem in delegated portfolio management. In the presence of such relativeperformance- based objectives, investors have reduced expected utility but markets are typically more informative and deeper. Furthermore, in a multiple asset/market framework we show that (i) relative performance concerns lead to an increase in the correlation between markets (financial contagion); (ii) benchmark inclusion increases price volatility; (iii) home bias emerges as a rational outcome. When information is costly, information acquisition is hindered and this attenuates the effects on informativeness and depth of the market.
Author: Ms.Deniz Igan Publisher: International Monetary Fund ISBN: 1513586874 Category : Business & Economics Languages : en Pages : 39
Book Description
We analyze the implications of linking the compensation of fund managers to the return of their portfolio relative to that of a benchmark—a common solution to the agency problem in delegated portfolio management. In the presence of such relativeperformance- based objectives, investors have reduced expected utility but markets are typically more informative and deeper. Furthermore, in a multiple asset/market framework we show that (i) relative performance concerns lead to an increase in the correlation between markets (financial contagion); (ii) benchmark inclusion increases price volatility; (iii) home bias emerges as a rational outcome. When information is costly, information acquisition is hindered and this attenuates the effects on informativeness and depth of the market.
Author: Mr.Garry J. Schinasi Publisher: International Monetary Fund ISBN: 1451855796 Category : Business & Economics Languages : en Pages : 39
Book Description
Models of “contagion” rely on market imperfections to explain why adverse shocks in one asset market might be associated with asset sales in many unrelated markets. This paper demonstrates that contagion can be explained with basic portfolio theory without recourse to market imperfections. It also demonstrates that “Value-at-Risk” portfolio management rules do not have significantly different consequences for portfolio rebalancing and contagion than other rules. The paper’s main conclusion is that portfolio diversification and leverage may be sufficient to explain why investors would find it optimal to sell many higher-risk assets when a shock to one asset occurs.
Author: Mr.Rabah Arezki Publisher: International Monetary Fund ISBN: 1498395325 Category : Business & Economics Languages : en Pages : 19
Book Description
The December issue of the Research Bulletin looks at “Seven Questions about Climate Change” (Rabah Arezki and Akito Matsumoto). The Research Summaries review “Winning the Oil Lottery: The Impact of Natural Resource Extraction on Growth” (Tiago Cavalcanti, Daniel Da Mata, and Frederik Toscani) and “Malaysia: Achieving High-Income Status through Resilience and Inclusive Growth” (Alex Mourmouras and Naimh Sheridan). The issue also includes regular updates on new IMF Working Papers, Staff Discussion Notes, IMF books, and the IMF Economic Review.
Author: Seyed Esmaeil Seyedan Publisher: ISBN: Category : Languages : en Pages : 35
Book Description
I study the real effects of benchmarking in the professional fund management industry. Stocks of the productive sector are traded in a competitive equity market. Investors delegate their portfolio decisions to managers whose performance is benchmarked against an aggregate stock market index. Benchmarking affects market prices and returns, which consequently changes firms' investment behaviour. Managers hedge themselves by tilting their portfolio toward the index which increases the demand and price of the stocks that feature prominently in the index. Higher prices lead to even more investment by larger firms, generating a positive feedback loop. In equilibrium there is an inefficient shift towards extreme states in which big sectors dominate the economy. In presence of benchmarking, index inclusion is preceded by rise in firm's investment rate relative to its capital stock, which drops by a smaller degree after the inclusion.
Author: Mr.Hamid Faruqee Publisher: International Monetary Fund ISBN: 1498329993 Category : Business & Economics Languages : en Pages : 126
Book Description
The United States has seen an improvement in economic activity, driven by consumption, and has taken a first step toward gradual normalization of interest rates. The U.S. recovery continues to support activity in Mexico, Central America, and the Caribbean, but China’s slowdown has reduced the demand for exports from South America. At the same time, the region’s commodity exporters have experienced further terms-of-trade shocks as commodity prices continue their decline globally. This report describes the policies and economic reforms needed to address the declining productive capacity in Latin America and the Caribbean. Three chapters assess corporate vulnerabilities in Latin America, analyze the degree of exchange rate pass-through in the region, and evaluate trends in public and private infrastructure investment.
Author: Luc Nijs Publisher: Springer Nature ISBN: 3030348172 Category : Business & Economics Languages : en Pages : 759
Book Description
This global handbook provides an up-to-date and comprehensive overview of shadow banking, or market-based finance as it has been recently coined. Engaging in financial intermediary services outside of normal regulatory parameters, the shadow banking sector was arguably a critical factor in causing the 2007-2009 financial crisis. This second volume explores three particular domains of shadow banking. The first domain deals with the macro-economic fundamentals of the respective shadow banking segments: Why do they exist, what problems do they solve and why are some of their embedded risks so persistent? The second domain captures the global dimensions of shadow banking markets, reviewing the particularities and specifics of various shadow banking systems around the world. Volume II concludes with an extensive overview of how the sector has changed since the financial crisis, focusing on regulatory arbitrage, contract imperfection and governance. Closing on unresolved issues and open-ended questions that will no doubt remain prominent in the shadow banking sector for years to come, this handbook is a must-read for professionals and policy-makers within the banking sector, as well as those researching economics and finance.
Author: Sitikantha Parida Publisher: ISBN: Category : Languages : en Pages :
Book Description
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.
Author: Jon A. Christopherson Publisher: McGraw Hill Professional ISBN: 0071733183 Category : Business & Economics Languages : en Pages : 14
Book Description
Here is a chapter from Portfolio Performance Measurement and Benchmarking, which will help you create a system you can use to accurately measure your performance. The authors highlight common mechanical problems involved in building benchmarks and clearly illustrate the resulting fallouts. The failure to choose the right investing performance benchmarks often leads to bad decisions or inaction and, inevitably, lost profits. In this book you will discover a foundation for benchmark construction and discuss methods for all different asset classes and investment styles.
Author: George O. Aragon Publisher: Now Publishers Inc ISBN: 1601980825 Category : Financial risk management Languages : en Pages : 123
Book Description
This paper provides a review of the methods for measuring portfolio performance and the evidence on the performance of professionally managed investment portfolios. Traditional performance measures, strongly influenced by the Capital Asset Pricing Model of Sharpe (1964), were developed prior to 1990. We discuss some of the properties and important problems associated with these measures. We then review the more recent Conditional Performance Evaluation techniques, designed to allow for expected returns and risks that may vary over time, and thus addressing one major shortcoming of the traditional measures. We also discuss weight-based performance measures and the stochastic discount factor approach. We review the evidence that these newer measures have produced on selectivity and market timing ability for professional managed investment funds. The evidence includes equity style mutual funds, pension funds, asset allocation style funds, fixed income funds and hedge funds.
Author: Ms.Deniz Igan
Author: Ms.Deniz Igan
Author: Deniz Igan
Author: Mr.Garry J. Schinasi
Author: Mr.Rabah Arezki
Author: Seyed Esmaeil Seyedan
Author: Mr.Hamid Faruqee
Author: Luc Nijs
Author: Sitikantha Parida
Author: Jon A. Christopherson
Author: George O. Aragon