Bird, R., Casavecchia, L., Pellizzari, P. and Woolley, Paul (2011) The impact on the pricing process of costly active management and performance chasing clients. Journal of Economic Interaction and Coordination, 6 (1). pp. 61-82. ISSN 1860-711X
Full text not available from this repository.Abstract
One of the necessary features of markets to produce efficient pricing is competition between information-based investors who quickly impound new information into price. However, a significant proportion of funds invested in today's equity markets are in the hands of managers who pursue a style that utilises little or none of the available information. We simulate such a market where the funds are being managed using the following three investment styles: fundamental, momentum and index. We confirm that the major pricing anomalies that have been highlighted previously in the literature are a natural consequence of competition between managers utilising these three investment styles. More importantly, we show that this situation is unlikely to change as long as markets continue to be dominated by costly active managers with clients who pursue outperformance. © 2010 Springer-Verlag.
| Item Type: | Article |
|---|---|
| Official URL: | http://www.springer.com/economics/economic+theory/... |
| Additional Information: | © 2010 Springer-Verlag. |
| Divisions: | Financial Markets Group |
| Subjects: | H Social Sciences > HG Finance |
| Date Deposited: | 19 May 2011 13:39 |
| Last Modified: | 13 Sep 2024 23:03 |
| URI: | http://eprints.lse.ac.uk/id/eprint/35882 |
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