Arbeitspapier

Management compensation and market timing under portfolio constraints

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This paper shows that portfolio constraints have important implications for management compensation and performance evaluation. In particular, in the presence of portfolio constraints, allowing for benchmarking can be bene…cial. Benchmark design arises as an alternative effort inducement mechanism vis-a-vis relaxing portfolio constraints. Numerically, we solve jointly for the manager's linear incentive fee and the optimal benchmark. The size of the incentive fee and the risk adjustment in the benchmark composition are increasing in the investor's risk tolerance and the manager's ability to acquire and process private information.

Sprache
Englisch

Erschienen in
Series: CFR Working Paper ; No. 11-16 [rev.]

Klassifikation
Wirtschaft
Criteria for Decision-Making under Risk and Uncertainty
Asymmetric and Private Information; Mechanism Design
Compensation Packages; Payment Methods
Thema
market timing
incentive fee
benchmarking
portfolio constraints

Ereignis
Geistige Schöpfung
(wer)
Agarwal, Vikas
Gómez, Juan-Pedro
Priestley, Richard
Ereignis
Veröffentlichung
(wer)
University of Cologne, Centre for Financial Research (CFR)
(wo)
Cologne
(wann)
2012

Handle
Letzte Aktualisierung
10.03.2025, 11:41 MEZ

Datenpartner

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Objekttyp

  • Arbeitspapier

Beteiligte

  • Agarwal, Vikas
  • Gómez, Juan-Pedro
  • Priestley, Richard
  • University of Cologne, Centre for Financial Research (CFR)

Entstanden

  • 2012

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