Institutional investors, heterogeneous benchmarks and the comovement of asset prices

Andrea M. Buffa and Idan Hodor

Journal of Financial Economics, 2023, vol. 147, issue 2, 352-381

Abstract: We study the equilibrium implications of a multi-asset economy in which asset managers performance is tied to different benchmarks, reflecting heterogeneity in their investment mandates. Fluctuations in the capital asset managers invest for benchmarking purposes, scaled by the size of the economy, induce price pressure that results in negative spillovers across assets. We characterize a rich structure of asset price comovement within and across benchmarks by analyzing shock elasticities and cross-elasticities of price-dividend ratios. Evidence on the heterogeneity of mutual fund mandates and the benchmarking-induced return comovement across cap-style and industry-sector portfolios corroborates the model assumptions and predictions.

Keywords: Asset management; Benchmarking; Spillovers; Comovement; Heterogenous investors (search for similar items in EconPapers)
JEL-codes: D53 G11 G12 G23 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304405X22002288
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:147:y:2023:i:2:p:352-381

DOI: 10.1016/j.jfineco.2022.11.002

Access Statistics for this article

Journal of Financial Economics is currently edited by G. William Schwert

More articles in Journal of Financial Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().