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Relative performance concerns among investment managers

Author

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  • Mark Whitmeyer

    (University of Texas at Austin)

Abstract

This paper examines the strategic interaction of n portfolio managers with relative performance concerns. We characterize the unique constant Nash equilibrium and derive some compelling results. Surprisingly, in equilibrium, more risk tolerant players do not generally take riskier positions than less risk tolerant players. We derive sufficient conditions under which this relation does hold. We also examine the effects of adding new players to the game on the equilibrium, and look at the equilibrium in the limiting case as the number of players goes to infinity. We show that for a symmetric population, the equilibrium strategy of the players converges pointwise to some limiting equilibrium policy.

Suggested Citation

  • Mark Whitmeyer, 2019. "Relative performance concerns among investment managers," Annals of Finance, Springer, vol. 15(2), pages 205-231, June.
    • Handle: RePEc:kap:annfin:v:15:y:2019:i:2:d:10.1007_s10436-019-00343-2
    DOI: 10.1007/s10436-019-00343-2
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    References listed on IDEAS

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    Cited by:

    1. Ruimeng Hu & Thaleia Zariphopoulou, 2021. "$N$-player and Mean-field Games in It\^{o}-diffusion Markets with Competitive or Homophilous Interaction," Papers 2106.00581, arXiv.org, revised Jun 2021.
    2. Whitmeyer, Mark, 2023. "Submission costs in risk-taking contests," Games and Economic Behavior, Elsevier, vol. 142(C), pages 101-112.
    3. Mark Whitmeyer, 2021. "Submission Fees in Risk-Taking Contests," Papers 2108.13506, arXiv.org.
    4. Nicole Bäuerle & Tamara Göll, 2023. "Nash equilibria for relative investors via no-arbitrage arguments," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 97(1), pages 1-23, February.

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    More about this item

    Keywords

    Behavioral finance; Relative concerns; Portfolio choice; Continuous-time finance;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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