The delegated portfolio management problem: Reputation and herding
AbstractWe study the relationship between financial intermediaries' reputation and herding in a delegated portfolio management problem context. We identify conditions under which equilibria exist such that intermediaries with good reputation invest in private information, whereas those with poor reputation herd. The model's empirical predictions are discussed and found to be consistent with previous evidence. From a normative stand, our work points out the possible existence of a policy trade-off between protecting investors by demanding more transparency from intermediaries and encouraging herding by free-riders for whom imitating portfolio decisions would be easier under tighter regulation, such as more frequent portfolio disclosure.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Banking & Finance.
Volume (Year): 33 (2009)
Issue (Month): 11 (November)
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Web page: http://www.elsevier.com/locate/jbf
Reputation Financial intermediaries Herding Delegated portfolio management;
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