Estimating the Intensity of Choice in a Dynamic Mutual Fund Allocation Decision
We estimate the intensity of choice parameter in heterogenous agent models in both a static and dynamic setting. Mean-variance optimizing agents choose among mutual funds of similar styles but varying performance. Actively managed funds have a lower Sharpe ratio than passive index funds, yet they attract a majority share of asset allocation. By estimating the relative growth of passive funds, we obtain a dynamic estimate of the intensity of choice calibrated to 10 years of mutual fund flows.
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| Length: | 20 pages |
| Date of creation: | 06 Jun 2004 |
| Handle: | RePEc:rut:rutres:200414 |
| Contact details of provider: | Postal: New Jersey Hall - 75 Hamilton Street, New Brunswick, NJ 08901-1248 Phone: (732) 932-7363 Fax: (732) 932-7416 Web page: http://economics.rutgers.edu/ More information through EDIRC
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