Fund Managers, Career Concerns, and Asset Price Volatility

Veronica Guerrieri and Péter Kondor

No 14898, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We propose a model where investors hire fund managers to invest either in risky bonds or in riskless assets. Some managers have superior information on the default probability. Looking at the past performance, investors update beliefs on their managers and make firing decisions. This leads to career concerns which affect investment decisions, generating a positive or negative "reputational premium". For example, when the default probability is high, uninformed managers prefer to invest in riskless assets to reduce the probability of being fired. As the economic and financial conditions change, the reputational premium amplifies the reaction of prices and capital flows.

JEL-codes: D53 D8 G1 (search for similar items in EconPapers)
Date: 2009-04
Note: AP EFG CF
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Published as Veronica Guerrieri & Peter Kondor, 2012. "Fund Managers, Career Concerns, and Asset Price Volatility," American Economic Review, American Economic Association, vol. 102(5), pages 1986-2017, August.

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Related works:
Journal Article: Fund Managers, Career Concerns, and Asset Price Volatility (2012)
Working Paper: Fund Managers, Career Concerns, and Asset Price Volatility (2011)
Working Paper: Fund managers, career concerns, and asset price volatility (2010)
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