Finance Papers

Document Type

Journal Article

Date of this Version

2005

Publication Source

Review of Financial Studies

Volume

18

Issue

4

Start Page

1139

Last Page

1169

DOI

10.1093/rfs/hhi031

Abstract

Because a money manager learns more about her skill from her management experience than outsiders can learn from her realized returns, she expects inefficiency in future contracts that condition exclusively on realized returns. A fund family that learns what the manager learns can reduce this inefficiency cost if the family is large enough. The family’s incentive is to retain any given manager regardless of her skill but, when the family has enough managers, it adds value by boosting the credibility of its retentions through the firing of others. As the number of managers grows, the efficiency loss goes to zero.

Copyright/Permission Statement

This is a pre-copyedited, author-produced PDF of an article accepted for publication in Review of Financial Studies following peer review. The version of record is available online at: http://dx.doi.org/10.1093/rfs/hhi031.

Share

COinS
 

Date Posted: 27 November 2017

This document has been peer reviewed.