Asset Prices and Institutional Investors

• 成果类型: Article
• 署名作者: Basak, Suleyman; Pavlova, Anna
• 署名单位: University of London; London Business School
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.103.5.1728
• 发表日期: 2013
• 页码: 1728-1758
• 关键词: STOCK-MARKET VOLATILITY; demand curves; moral hazard; Mutual funds; INVESTMENT; WEALTH; benchmarking; explanation; performance; incentives

摘要

We consider an economy populated by institutional investors alongside standard retail investors. Institutions care about their performance relative to a certain index. Our framework is tractable, admitting exact closed-form expressions, and produces the following analytical results. We find that institutions tilt their portfolios towards stocks that compose their benchmark index. The resulting price pressure boosts index stocks. By demanding more risky stocks than retail investors, institutions amplify the index stock volatilities and aggregate stock market volatility and give rise to countercyclical Sharpe ratios. Trades by institutions induce excess correlations among stocks that belong to their benchmark, generating an asset-class effect. (JEL G12, G23)