Citation

Discussion Paper Details

Please find the details for DP8454 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Fund Managers, Career Concerns, and Asset Price Volatility

Author(s): Veronica Guerrieri and Péter Kondor

Publication Date: June 2011

Keyword(s): amplification, career concerns and delegated portfolio management

Programme Area(s): Financial Economics

Abstract: We propose a model of delegated portfolio management with career concerns. Investors hire fund managers to invest their capital either in risky bonds or in riskless assets. Some managers have superior information on the default risk. Looking at the past performance, investors update beliefs on their managers and make firing decisions. This leads to career concerns which a¤ect investment decisions, generating a counter-cyclical 'reputational premium.' When default risk is high, the bond?s return is high to compensate uninformed managers for the high risk of being fired. As default risk changes over time, the reputational premium amplifies price volatility.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=8454

Bibliographic Reference

Guerrieri, V and Kondor, P. 2011. 'Fund Managers, Career Concerns, and Asset Price Volatility'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=8454