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An equilibrium model of risk management spillover

Author

Listed:
  • Huang, Shiyang
  • Jiang, Ying
  • Qiu, Zhigang
  • Ye, Zhiqiang

Abstract

This paper investigates the effects of relative performance concerns on fund managers’ behavior when managers are heterogeneous in their risk management practices. We find that relative performance concerns have distinct effects on different managers as follows: managers without risk management constraints conduct risk management, while those with risk management constraints do not change their trading. Our results suggest that a small number of fund managers with risk management requirements can have a significant impact on the market. Our theory can potentially reconcile the long-lasting debate regarding the impact of risk management on financial markets.

Suggested Citation

  • Huang, Shiyang & Jiang, Ying & Qiu, Zhigang & Ye, Zhiqiang, 2019. "An equilibrium model of risk management spillover," Journal of Banking & Finance, Elsevier, vol. 107(C), pages 1-1.
    • Handle: RePEc:eee:jbfina:v:107:y:2019:i:c:3
    DOI: 10.1016/j.jbankfin.2019.08.002
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    Cited by:

    1. Guo, Rui & Jiang, Ying & Li, Ao & Qiu, Zhigang & Wang, Hefei, 2021. "A model of delegation with a VaR constraint," Finance Research Letters, Elsevier, vol. 42(C).

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    More about this item

    Keywords

    Delegated portfolio management; Relative performance; Risk management; Spillover;
    All these keywords.

    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

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