Rewarding Trading Skills without Inducing Gambling

• 成果类型: Article
• 署名作者: Makarov, Igor; Plantin, Guillaume
• 署名单位: University of London; London School Economics & Political Science
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12257
• 发表日期: 2015
• 页码: 925-962
• 关键词: managerial incentives; COMPENSATION; BEHAVIOR; firm

摘要

This paper develops a model of active asset management in which fund managers may forgo alpha-generating strategies, preferring instead to make negative-alpha trades that enable them to temporarily manipulate investors' perceptions of their skills. We show that such trades are optimally generated by taking on hidden tail risk, and are more likely to occur when fund managers are impatient and when their trading skills are scalable, and generate a high profit per unit of risk. We propose long-term contracts that deter this behavior by dynamically adjusting the dates on which the manager is compensated in response to her cumulative performance.