An equilibrium model of risk management spillover
Shiyang Huang,
Ying Jiang,
Zhigang Qiu (zhigang.qiu@ruc.edu.cn) and
Zhiqiang Ye
Journal of Banking & Finance, 2019, vol. 107, issue C, -
Abstract:
This paper investigates the effects of relative performance concerns on fund managers’ behavior when managers are heterogeneous in their risk management practices. We find that relative performance concerns have distinct effects on different managers as follows: managers without risk management constraints conduct risk management, while those with risk management constraints do not change their trading. Our results suggest that a small number of fund managers with risk management requirements can have a significant impact on the market. Our theory can potentially reconcile the long-lasting debate regarding the impact of risk management on financial markets.
Keywords: Delegated portfolio management; Relative performance; Risk management; Spillover (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:107:y:2019:i:c:3
DOI: 10.1016/j.jbankfin.2019.08.002
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