Strategic Asset Allocation in Money Management

This article analyzes the dynamic portfolio choice implications of strategic interaction among money managers. The strategic interaction emerges as the managers compete for money flows displaying empirically documented convexities. A manager gets money flows increasing with performance, and hence displays relative performance concerns, if her relative return is above a threshold; otherwise she receives no (or constant) flows and has no relative concerns. We provide a tractable formulation of such strategic interaction between two risk averse managers in a continuous-time setting, and solve for their equilibrium policies in closed-form. When the managers’ risk aversions are considerably different, we do not obtain a Nash equilibrium as the managers cannot agree on who loses (getting no flows) in some states. We obtain equilibria, but multiple, when the managers are similar since they now care only about the total number of losing states. We recover a unique equilibrium, however, when a sufficiently high threshold makes the competition for money flows less intense. The managers’ unique equilibrium policies are driven by chasing and contrarian behaviors when either manager substantially outperforms the opponent, and by gambling behavior when their performances are close to the threshold. Depending on the stock correlation, the direction of gambling for a given manager may differ across stocks, however the two managers always gamble strategically in the opposite direction from each other in each individual stock.Money Managers, Strategic Interaction, Portfolio Choice, Relative Performance, Incentives, Risk Shifting, Fund Flows, Tournaments

Difference in Interim Performance and Risk Taking with Short-sale Constraints

Absent much theory, empirical works often rely on the following informal reasoning when looking for evidence of a mutual fund tournament: If there is a tournament, interim winners have incentives to decrease their portfolio volatility as they attempt to protect their lead, while interim losers are expected to increase their volatility so as to catch up with winners. We consider a rational model of a mutual fund tournament in the presence of short-sale constraints and find the opposite – interim winners choose more volatile portfolios in equilibrium than interim losers. Several empirical works present evidence consistent with our model, however based on the above informal argument they appear to conclude against the tournament behavior. We argue that this conclusion is unwarranted. We also demonstrate that tournament incentives lead to differences in interim performance for otherwise identical managers, and that mid-year trading volume is inversely related to mid-year stock return.mutual fund tournament, risk-taking incentives, relative performance, portfolio choice, short-sale constraints

HyperLEDA. III. The catalogue of extragalactic distances

We present the compilation catalogue of redshift-independent distances included in the HyperLEDA database. It is actively maintained to be up-to-date, and the current version counts 6640 distance measurements for 2335 galaxies compiled from 430 published articles. Each individual series is recalibrated onto a common distance scale based on a carefully selected set of high-quality measurements. This information together with data on HI line-width, central velocity dispersion, magnitudes, diameters, and redshift is used to derive a homogeneous distance estimate and physical properties of galaxies, such as their absolute magnitudes and intrinsic size.Comment: accepted to A&