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The Appeal of Risky Assets

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  • Stolper, Anno

Abstract

A fund's performance is usually compared to the performance of an index or other funds. If a fund trails the benchmark, the fund manager is often replaced. We argue that this may lead to excessive risk-taking if fund managers differ in ability and have the opportunity to take excessive risk. To match the benchmark, fund managers may increase the risk of their portfolio even if this decreases the expected return on the portfolio.

Suggested Citation

  • Stolper, Anno, 2010. "The Appeal of Risky Assets," Discussion Papers in Economics 11878, University of Munich, Department of Economics.
  • Handle: RePEc:lmu:muenec:11878
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    References listed on IDEAS

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    More about this item

    Keywords

    Benchmarking; risk taking;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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