Relative performance concerns among investment managers

Research output: Contribution to journalArticlepeer-review

Abstract

This paper examines the strategic interaction of n portfolio managers with relative performance concerns. We characterize the unique constant Nash equilibrium and derive some compelling results. Surprisingly, in equilibrium, more risk tolerant players do not generally take riskier positions than less risk tolerant players. We derive sufficient conditions under which this relation does hold. We also examine the effects of adding new players to the game on the equilibrium, and look at the equilibrium in the limiting case as the number of players goes to infinity. We show that for a symmetric population, the equilibrium strategy of the players converges pointwise to some limiting equilibrium policy.

Original languageEnglish (US)
Pages (from-to)205-231
Number of pages27
JournalAnnals of Finance
Volume15
Issue number2
DOIs
StatePublished - Jun 1 2019
Externally publishedYes

Keywords

  • Behavioral finance
  • Continuous-time finance
  • Portfolio choice
  • Relative concerns

ASJC Scopus subject areas

  • Finance
  • Economics, Econometrics and Finance(all)

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