Abstract

http://ssrn.com/abstract=1101652
 
 

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The Cross-section of Managerial Ability, Incentives, and Risk Preferences


Ralph S. J. Koijen


London Business School - Department of Finance; National Bureau of Economic Research (NBER)

October 16, 2012

EFA 2008 Athens Meetings Paper
AFA 2009 San Francisco Meetings Paper

Abstract:     
I estimate a dynamic investment model for mutual managers to study the cross-sectional distribution of ability, incentives, and risk preferences. The manager's compensation depends on the size of the fund, which fluctuates due to fund returns and due to fund flows that respond to the fund's relative performance. The model provides an economic interpretation of time-varying coefficients in performance regressions in terms of the structural parameters. I document that the estimates of fund alphas are precise and virtually unbiased. I find substantial heterogeneity in ability, risk preferences, and pay-for-performance sensitivities that relates to observable fund characteristics.

Number of Pages in PDF File: 88

Keywords: mutual fund performance measurement, structural estimation

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Date posted: March 23, 2009 ; Last revised: October 17, 2012

Suggested Citation

Koijen, Ralph S. J., The Cross-section of Managerial Ability, Incentives, and Risk Preferences (October 16, 2012). EFA 2008 Athens Meetings Paper; AFA 2009 San Francisco Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1101652 or http://dx.doi.org/10.2139/ssrn.1101652

Contact Information

Ralph S. J. Koijen (Contact Author)
London Business School - Department of Finance ( email )
Sussex Place
Regent's Park
London NW1 4SA
United Kingdom
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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