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    Relative performance, risk and entry in the mutual fund industry

    Loranth, G. and Sciubba, Emanuela (2006) Relative performance, risk and entry in the mutual fund industry. The B.E. Journal of Economic Analysis & Policy 6 (1), p. 19. ISSN 1935-1682.

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    This paper analyses the impact of the emergence of new funds on the portfolio decisions of mutual fund managers who are evaluated on the basis of relative performance within a dynamic model. Recent theoretical literature has pointed to the inefficiencies in portfolio selection caused by relative performance evaluation of fund managers. We find that the on-going process of creation of new funds, by posing an entry threat to the incumbent fund managers, greatly alleviates these inefficiencies. Hence the transitory market structure that characterises the mutual fund industry could explain why relative performance evaluation is widely in use.


    Item Type: Article
    School: Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School
    Depositing User: Sarah Hall
    Date Deposited: 27 Jul 2020 16:21
    Last Modified: 02 Aug 2023 18:01


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