The Delegated Lucas Tree

• 成果类型: Article
• 署名作者: Kaniel, Ron; Kondor, Peter
• 署名单位: University of Rochester; Central European University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhs126
• 发表日期: 2013
• 页码: 929
• 关键词: MUTUAL FUND PERFORMANCE; STOCK-PICKING TALENT; EMPIRICAL DECOMPOSITION; transactions costs; risk-taking; COMPENSATION; equilibrium; management; returns; MARKETS

摘要

We analyze the effects of the observed increased share of delegated capital for trading strategies and equilibrium prices by introducing delegation into a standard Lucas exchange economy. In equilibrium, some investors trade on their own account, but others decide to delegate trading to professional fund managers. Flow-performance incentive functions describe how much capital clients provide to funds at each date as a function of past performance. Convex flow-performance relations imply that the average fund outperforms the market in recessions and underperforms in expansions. When the share of capital that is delegated is low, all funds follow the same strategy. However, when the equilibrium share of delegated capital is high, funds with identical incentives employ heterogeneous trading strategies. A group of managers borrows to take on a levered position on the stock. Thus, fund returns are dispersed in the cross-section and the outstanding amounts of borrowing and lending increase. The relation between the share of delegated capital and the Sharpe ratio typically follows an inverse U-shaped pattern.