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http://hdl.handle.net/10419/52241
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| Title: | | Management compensation and market timing under portfolio constraints |
| Authors: | | Agarwal, Vikas Gómez, Juan-Pedro Priestley, Richard |
| Issue Date: | | 2011 |
| Series/Report no.: | | CFR working paper 11-16 |
| Abstract: | | This paper shows that portfolio constraints have important implications for management compensation and performance evaluation. Concretely, in the presence of portfolio constraints, allowing for benchmarking can be beneficial. Benchmark design arises as an alternative effort inducement mechanism vis-a-vis relaxing portfolio constraints. Numerically, we solve jointly for the manager's linear incentive fee and the optimal benchmark. The size of the incentive fee and the risk adjustment in the benchmark composition are increasing in the investor's risk tolerance and the manager's ability to acquire and process private information. |
| Subjects: | | market timing incentive fee benchmarking portfolio constraints |
| JEL: | | D81 D82 J33 |
| Is replaced by the following version: | | http://hdl.handle.net/10419/70115 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CFR Working Papers, Centre for Financial Research (CFR), Universität Köln
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| The document was removed on behalf of the author(s)/ the editor(s) on: February 13, 2013 |
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