Arbeitspapier
Fund flows inducing mispricing of risk in competitive financial markets
This paper studies the effect of new fund flows on investment behavior and the resulting equilibrium price of risk. The Small Fund Industry model shows equilibria with overinvestment in unprofitable and underinvestment in profitable investment opportunities. The Large Fund Industry model derives market prices for risk and analyzes the resulting price distortions in equilibrium. New flow of funds to the asset management industry lead to inefficient investment decisions, mispricing of risk, and distortion of market implied probabilities. Furthermore, the paper provides an explanation for partial market failure and trade among identical asset managers without assuming heterogeneous beliefs.
- Sprache
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Englisch
- Erschienen in
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Series: ESMT Working Paper ; No. 15-04
- Klassifikation
-
Management
General Equilibrium and Disequilibrium: Financial Markets
Information, Knowledge, and Uncertainty: General
Financial Crises
Portfolio Choice; Investment Decisions
Asset Pricing; Trading Volume; Bond Interest Rates
Financial Institutions and Services: General
- Thema
-
asset pricing
mutual funds
flow of funds
mispricing
misallocation of capital
overinvestment
underinvestment
investment decision
implied probabilites
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Stahmer, Axel
- Ereignis
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Veröffentlichung
- (wer)
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European School of Management and Technology (ESMT)
- (wo)
-
Berlin
- (wann)
-
2015
- Handle
- URN
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urn:nbn:de:101:1-201511278117
- Letzte Aktualisierung
-
10.03.2025, 11:43 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Stahmer, Axel
- European School of Management and Technology (ESMT)
Entstanden
- 2015