Review of Financial Studies Vol. 33 No. 8 2020
Transparency and Talent Allocation in Money Management
Abstract
We construct and analyze the equilibrium of a model of delegated portfolio management in which money managers signal their investment skills via fund transparency. To lower the costs of transparency, high-skill managers rely on their performance to separate from low-skill managers over time. In contrast, medium-skill managers rely on transparency to separate, especially when it is difficult for investors to tell them apart through performance alone. Low-skill managers mimic high-skill managers in opaque funds, hoping to replicate their performance and compensation. The model yields several novel empirical predictions that contrast transparent and opaque funds.
- DOI
- 10.1093/rfs/hhz116
- Volume
- 33
- Issue
- 8
- Pages
- 3889-3924
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref