Posted: 31 Dec 2011
Date Written: January 2012
In this paper we summarise and extend the agency‐based model of asset pricing of Brennan (1993) to show that the implied agency effects on asset pricing are too small to be empirically detectable: empirical tests confirm this and we show that the positive findings of Gomez and Zapatero (2003) are due to their choice of sample. We also derive new empirical implications for the composition of institutional investment portfolios and empirically confirm the major result, that institutional portfolios will be short the minimum variance portfolio.
Keywords: portfolio choice, asset pricing, CAPM, institutional investors
JEL Classification: G110, G120, G230
Suggested Citation: Suggested Citation
Brennan, Michael J. and Cheng, Xiaolong and Li, Feifei, Agency and Institutional Investment (January 2012). European Financial Management, Vol. 18, Issue 1, pp. 1-27, 2012. Available at SSRN: https://ssrn.com/abstract=1977739 or http://dx.doi.org/10.1111/j.1468-036X.2011.00596.x
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