Competition Among University Endowments
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.
|Date of creation:||Jun 2012|
|Date of revision:|
|Publication status:||published as Competition Among University Endowments , William N. Goetzmann, Sharon Oster. in How the Financial Crisis and Great Recession Affected Higher Education , Brown and Hoxby. 2015|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
References listed on IDEAS
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.:
- Chevalier, J. & Ellison, G., 1996.
"Risk Taking by Mutual Funds as a Response to Incentives,"
96-3, Massachusetts Institute of Technology (MIT), Department of Economics.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- Stulz, Rene M., 2007.
"Hedge Funds: Past, Present, and Future,"
Working Paper Series
2007-3, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
- 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.
- 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.
- Bakshi, Gurdip S & Chen, Zhiwu, 1996.
"The Spirit of Capitalism and Stock-Market Prices,"
American Economic Review,
American Economic Association, vol. 86(1), pages 133-57, March.
- 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.
- Mary Burke & Tim R. Sass, 2011.
"Classroom peer effects and student achievement,"
Public Policy Discussion Paper
11-5, Federal Reserve Bank of Boston.
- Mary A. Burke & Tim R. Sass, 2008. "Classroom peer effects and student achievement," Working Papers 08-5, Federal Reserve Bank of Boston.
- Mary A. Burke & Tim R. Sass, 2006. "Classroom Peer Effects and Student Achievement," Working Papers wp2006_02_02, Department of Economics, Florida State University.
- Hansmann, Henry, 1990. "Why Do Universities Have Endowments?," The Journal of Legal Studies, University of Chicago Press, vol. 19(1), pages 3-42, January.
- 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.
- Brown, Stephen J & Goetzmann, William N, 1995.
" Performance Persistence,"
Journal of Finance,
American Finance Association, vol. 50(2), pages 679-98, June.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:18173. 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.