How Do Principal-Agent Effects in Delegated Portfolio Management Affect Asset Prices?

摘要

We investigate the impact of delegated portfolio management on asset prices in a noisy rational equilibrium model. Asset prices in our model are linear in fund managers’ private signals and in realized supply shocks. We show that equilibrium expected returns 1) decrease as the proportion of fund managers increase in the economy; 2) decrease as the precision of fund managers’ signals increase’ and 3) increase as the fund managers’ contingent fees increase.