Efficiently Inefficient Markets for Assets and Asset Management / Nicolae B. Gârleanu, Lasse H. Pedersen.

Format:

Book

Author/Creator:

Gârleanu, Nicolae B.

Contributor:

National Bureau of Economic Research.

Pedersen, Lasse H.

Series:

Working Paper Series (National Bureau of Economic Research) no. w21563.

NBER working paper series no. w21563

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2015.

Summary:

We consider a model where investors can invest directly or search for an asset manager, information about assets is costly, and managers charge an endogenous fee. The efficiency of asset prices is linked to the efficiency of the asset management market: if investors can find managers more easily, more money is allocated to active management, fees are lower, and asset prices are more efficient. Informed managers outperform after fees, uninformed managers underperform after fees, and the net performance of the average manager depends on the number of "noise allocators." Finally, we show why large investors should be active and discuss broader implications and welfare considerations.

Notes:

Print version record

September 2015.