Experiments on Asset Pricing under Delegated Portfolio Management∗
نویسندگان
چکیده
We study the impact of delegated portfolio management on asset pricing in a large-scale experimental setting. As predicted by standard models, in early rounds of our experiments delegation has no impact on pricing; we replicate CAPM pricing as in earlier experiments without delegation. However, CAPM pricing fails in later rounds. We attribute this to the fund flows: investors tend to increase allocations to the managers who performed well in the past. In addition, the fund flows implicitly reflect a reward for variance. As a result, funds become concentrated with a few managers, and the aggregation of individual deviations from meanvariance optimal demands, needed to ensure CAPM pricing, no longer obtains. JEL Classification: G11, G12
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