Delegated Portfolio Management

Paulo Coutinho and Benjamin Tabak

No 60, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: In this paper, we examine optimal portfolio decisions within a decentralized framework. There are many portfolio managers choosing optimal portfolio weights in a mean-variance framework and taking decisions in a decentralized way. However, the overall portfolio may not be efficient, as the portfolio managers do not take into account the overall covariance matrix. We show that the initial endowment that portfolio managers can use within the firm in order to manage their portfolios can be used as a control variable by the top administration and redistributed within the firm in order to achieve overall efficiency.

Date: 2002-12
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Citations: View citations in EconPapers (19)

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