Competition Among University Endowments
In: How the Financial Crisis and Great Recession Affected Higher Education
The asset allocation of university endowments has recently shifted dramatically towards alternative investments. In this paper we examine the role played by strategic competition in motivating this shift. Using a metric capturing competition for undergraduate applications, we test whether endowment performance relative to a school's nearest competitor is associated with the likelihood of changing investment policy, and conditionally, whether the nature of that change is consistent with the goal of "catching up" to its closest rival. Conditional on indicating a policy change, we find that endowments appear to use marketable alternatives - i.e. hedge funds - to catch up to competitors. More generally, we find evidence that endowments with below median holdings of alternative investments tend to shift policies in that direction. Besides herding behavior we also find trend-chasing behavior. Endowments with recent positive experience with various alternative asset classes tend to increase exposure to them. We consider the long-run implications of this competitive and trending behavior for the ability of endowments to deliver intergenerational equity.
(This abstract was borrowed from another version of this item.)
|This chapter was published in: ||This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number
12858.||Handle:|| RePEc:nbr:nberch:12858||Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Christopher N. Avery & Mark E. Glickman & Caroline M. Hoxby & Andrew Metrick, 2013.
"A Revealed Preference Ranking of U.S. Colleges and Universities,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 128(1), pages 425-467.
- Christopher Avery & Mark Glickman & Caroline Hoxby & Andrew Metrick, 2004. "A Revealed Preference Ranking of U.S. Colleges and Universities," NBER Working Papers 10803, National Bureau of Economic Research, Inc.
- Brown, Stephen J & Goetzmann, William N & Ibbotson, Roger G, 1999. "Offshore Hedge Funds: Survival and Performance, 1989-95," The Journal of Business, University of Chicago Press, vol. 72(1), pages 91-117, January.
- Josh Lerner & Antoinette Schoar & Jialan Wang, 2008.
"Secrets of the Academy: The Drivers of University Endowment Success,"
NBER Working Papers
14341, National Bureau of Economic Research, Inc.
- Josh Lerner & Antoinette Schoar & Jialan Wang, 2008. "Secrets of the Academy: The Drivers of University Endowment Success," Journal of Economic Perspectives, American Economic Association, vol. 22(3), pages 207-22, Summer.
- Judith A. Chevalier & Glenn D. Ellison, 1995.
"Risk Taking by Mutual Funds as a Response to Incentives,"
NBER Working Papers
5234, National Bureau of Economic Research, Inc.
- Chevalier, Judith & Ellison, Glenn, 1997. "Risk Taking by Mutual Funds as a Response to Incentives," Journal of Political Economy, University of Chicago Press, vol. 105(6), pages 1167-1200, December.
- Chevalier, J. & Ellison, G., 1996. "Risk Taking by Mutual Funds as a Response to Incentives," Working papers 96-3, Massachusetts Institute of Technology (MIT), Department of Economics.
- Erik R. Sirri & Peter Tufano, 1998. "Costly Search and Mutual Fund Flows," Journal of Finance, American Finance Association, vol. 53(5), pages 1589-1622, October.
- William N. Goetzmann & Stephen J. Brown, 2005.
Yale School of Management Working Papers
ysm451, Yale School of Management.
- Dennis Epple & Elizabeth Newlon & Richard Romano, 2000.
"Ability Tracking, School Competition, and the Distribution of Educational Benefits,"
NBER Working Papers
7854, National Bureau of Economic Research, Inc.
- Epple, Dennis & Newlon, Elizabeth & Romano, Richard, 2002. "Ability tracking, school competition, and the distribution of educational benefits," Journal of Public Economics, Elsevier, vol. 83(1), pages 1-48, January.
- Hansmann, Henry, 1990. "Why Do Universities Have Endowments?," The Journal of Legal Studies, University of Chicago Press, vol. 19(1), pages 3-42, January.
- Dennis Epple & Richard Romano & Holger Sieg, 2006.
"Admission, Tuition, and Financial Aid Policies in the Market for Higher Education,"
Econometric Society, vol. 74(4), pages 885-928, 07.
- Dennis Epple & Richard Romano & Holger Sieg, . "Admission, Tuition, and Financial Aid Policies in the Market for Higher Education," GSIA Working Papers 2003-04, Carnegie Mellon University, Tepper School of Business.
- Ren� M. Stulz, 2007.
"Hedge Funds: Past, Present, and Future,"
Journal of Economic Perspectives,
American Economic Association, vol. 21(2), pages 175-194, Spring.
- Litvack, James M & Malkiel, Burton G & Quandt, Richard E, 1974. "A Plan for the Definition of Endowment Income," American Economic Review, American Economic Association, vol. 64(2), pages 433-37, May.
- Gurdip S. Bakshi & Zhiwu Chen, 1996.
"The Spirit of Capitalism and Stock-Market Prices,"
CEMA Working Papers
511, China Economics and Management Academy, Central University of Finance and Economics.
- Mary A. Burke & Tim R. Sass, 2006.
"Classroom Peer Effects and Student Achievement,"
wp2006_02_02, Department of Economics, Florida State University.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberch:12858. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.