کد مقاله | کد نشریه | سال انتشار | مقاله انگلیسی | نسخه تمام متن |
---|---|---|---|---|
983322 | 1480450 | 2013 | 10 صفحه PDF | دانلود رایگان |

• We model a sequential game between a fund manager and an investor.
• An equilibrium exists where the manager sometimes window-dresses and the investor sometimes withdraws funds.
• An equilibrium does not exist where the manager never window-dresses.
• We show that window-dressing is a rational behavior even when fund outflows may result.
We use a sequential game to analyze an agency problem in the mutual fund industry where a representative fund manager considers window-dressing his portfolio holdings for the purpose of attracting fund flows from a representative investor. The manager is motivated to window-dress to improve the investor's perception of managerial skill which may positively affect fund flows in the next period. However, the investor may suspect window-dressing and thus downgrade perceived managerial skill. The model supports a Bayesian Nash equilibrium where the manager window-dresses only when receiving a low return in the first period and the investor withdraws funds only when observing low returns in both periods. Consequently, we show that window-dressing is a rational behavior even when fund outflows may result.
Journal: The Quarterly Review of Economics and Finance - Volume 53, Issue 4, November 2013, Pages 440–449