Delegated trading and the speed of adjustment in security prices

• 成果类型: Article
• 署名作者: Edelen, Roger M.; Kadlec, Gregory B.
• 署名单位: University of California System; University of California Davis; Virginia Polytechnic Institute & State University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2010.11.008
• 发表日期: 2012
• 页码: 294-307
• 关键词: Trading; Agency conflict; Institutional investing

摘要

Institutional trading arrangements often involve the portfolio manager delegating the task of trade execution to a separate division within the firm. We model the agency conflict that arises in this setting and show that optimal performance benchmarks often create an incentive to execute orders contrary to concurrent information flow. We hypothesize that aggregate contrarian trading resulting from widespread application of such benchmarks leads to delays in the assimilation of information in security prices. Using institutional trading data, we document the hypothesized contrarian trading pattern and relate the pattern to price-adjustment delays in the response of individual stocks to index futures returns. The evidence supports the assertion that delegated institutional trading contributes to these delays. (C) 2011 Elsevier BM. All rights reserved.