Fund Tournaments and Asset Bubbles

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

This article studies how fund managers' relative-performance concerns affect their investment strategies in bubble periods. The managers compete for flows that are sensitive to their performance ranking. Severe ranking tournaments with highly convex flow-performance relationship lead managers to ride bubbles to outperform each other, making bubbles long-lived. However, moderate tournaments may lead them to attack bubbles quickly. The results are consistent with the observed cross-sectional variation in funds' investment strategies in bubble periods. Bubble-riding behavior is pronounced if the funds' tournament is too close to call, as interim followers try to catch up while interim leaders try to stay ahead.

Original languageEnglish
Pages (from-to)1383-1426
Number of pages44
JournalReview of Finance
Volume20
Issue number4
DOIs
Publication statusPublished - 2016 Jul 1
Externally publishedYes

Fingerprint

Bubble
Asset bubbles
Tournament
Investment strategy
Ranking
Managers
Relative performance
Attack
Fund managers
Follower
Catch-up

Keywords

  • D82
  • G14
  • G23

ASJC Scopus subject areas

  • Finance

Cite this

Fund Tournaments and Asset Bubbles. / Sato, Yuki.

In: Review of Finance, Vol. 20, No. 4, 01.07.2016, p. 1383-1426.

Research output: Contribution to journalArticle

Sato, Yuki. / Fund Tournaments and Asset Bubbles. In: Review of Finance. 2016 ; Vol. 20, No. 4. pp. 1383-1426.
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