Mutual Fund Competition in the Presence of Dynamic Flows
AbstractThis paper analyzes competition between mutual funds in a multiple funds version of the model of Hugonnier and Kaniel . We characterize the set of equilibria for this delegated portfolio management game and show that there exists a unique Pareto optimal equilibrium. The main result of this paper shows that the funds cannot differentiate themselves through portfolio choice in the sense that they should offer the same risk/return tradeoff in equilibrium. This result brings theoretical support to the findings of recent empirical studies on the importance of media coverage and marketing in the mutual funds industry.
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Bibliographic InfoPaper provided by Swiss Finance Institute in its series Swiss Finance Institute Research Paper Series with number 08-26.
Length: 28 pages
Date of creation: Sep 2008
Date of revision:
portfolio management; asset-based management fees; mutual funds; dynamic flows; stochastic differential game.;
Find related papers by JEL classification:
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-12-07 (All new papers)
- NEP-COM-2008-12-07 (Industrial Competition)
- NEP-FMK-2008-12-07 (Financial Markets)
You can help add them by filling out this form.
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