Performance Evaluation and Financial Market Runs

Wolf Wagner (wagner@rsm.nl)

Review of Finance, 2013, vol. 17, issue 2, 597-624

Abstract: This paper develops a model in which performance evaluation causes runs by fund managers and results in asset fire sales. Performance evaluation nonetheless is efficient as it disciplines managers. Optimal performance evaluation combines absolute and relative components in order to make runs less likely. When runs induce large price discounts, this requires a high degree of absolute performance evaluation and a low degree of relative performance evaluation. The overall costs of using performance evaluation are shown to be decreasing in asset liquidity, implying that more developed financial markets should have more delegation. However, such markets are not less prone to runs. Copyright 2013, Oxford University Press.

Date: 2013
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://hdl.handle.net/10.1093/rof/rfs006 (application/pdf)
Access to full text is restricted to subscribers.

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:oup:revfin:v:17:y:2013:i:2:p:597-624

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

Review of Finance is currently edited by Marcin Kacperczyk

More articles in Review of Finance from European Finance Association Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press (joanna.bergh@oup.com).