Title: Money managers' interactions and Bayesian model

Authors: Wei W. Simi; Xiaoli Wang

Addresses: Economics and Finance of Zicklin School of Business, Baruch College, CUNY, New York, USA ' School of Management, Marist College, Poughkeepsie, NY, 12601, USA

Abstract: The essential incentives for investment portfolio managers are pursing relative outstanding portfolio performance among their peers in order to be rewarded for investment fund inflows. This competition for fund inflows has becomes dynamic games among money managers. This paper accordingly proposes a new strategic asset allocation methodology by considering strategic interactions among portfolio managers with the dynamic consideration of incomplete information. To be specific, we extended the approach of Basak and Makarov (2012) by considering the case that portfolio managers make strategic asset allocation decisions under the situation of incomplete information using the framework of Bayesian (Nash) equilibrium.

Keywords: portfolio choice; strategic interaction; Bayesian; Nash equilibrium; relative performance.

DOI: 10.1504/IJAMS.2020.106737

International Journal of Applied Management Science, 2020 Vol.12 No.2, pp.97 - 117

Received: 05 Jun 2018
Accepted: 07 Feb 2019

Published online: 02 Apr 2020 *

Full-text access for editors Access for subscribers Purchase this article Comment on this article