Environmental Science
8 years ago

Special fund manager contracts may lead to risky investment decisions and herd behavior.

Ruan kexue
The Theory Model of Fund Manager's Incentives on Relative Performance Contracts
Song Jia-sha

Paper Summary

The article discusses how fund managers' incentives can affect their investment decisions and behavior. By studying a model with three competitive fund managers, it shows that certain types of performance contracts can lead to unusual investment choices or herd behavior. The government is advised to create a fair evaluation system for fund managers to support the long-term growth of the fund industry.

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