Delegated Portfolio Management: A Survey Of The Theoretical Literature
AbstractThis paper provides a selective review of the theoretical literature on delegated portfolio management as a principal-agent relationship. The main focus of the paper is to review the analytical issues raised by the peculiar nature of the delegated portfolio management relationship within the broader class of principal-agent models. In particular, the paper discusses the performance of linear versus nonlinear compensation contracts in a single-period setting, the possible effects of limited liability of portfolio managers, the role of reputational concerns in a multiperiod framework, and the incentives to noise trading. In addition, the paper deals with some general equilibrium dimensions and asset pricing implications of delegated portfolio management. The paper also suggests some directions for future research. Copyright 2006 The Author Journal compilation � 2006 Blackwell Publishing Ltd.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Journal of Economic Surveys.
Volume (Year): 20 (2006)
Issue (Month): 5 (December)
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Other versions of this item:
- Stracca, Livio, 2005. "Delegated portfolio management: a survey of the theoretical literature," Working Paper Series 0520, European Central Bank.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
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