Wisdom of the Institutional Crowd

11 Pages Posted: 10 Mar 2017

See all articles by Kevin Primicerio

Kevin Primicerio

CentraleSupélec

Damien Challet

CentraleSupélec; Encelade Capital SA

Stanislao Gualdi

Capital Fund Management

Date Written: March 8, 2017

Abstract

The average portfolio structure of institutional investors is shown to have properties which account for transaction costs in an optimal way. This implies that financial institutions unknowingly display collective rationality, or Wisdom of the Crowd. Individual deviations from the rational benchmark are ample, which illustrates that system-wide rationality does not need nearly rational individuals. Finally we discuss the importance of accounting for constraints when assessing the presence of Wisdom of the Crowd.

Keywords: Keywords Wisdom of the Crowd, Institutional Investors, Optimal Portfolios

JEL Classification: G02, G11

Suggested Citation

Primicerio, Kevin and Challet, Damien and Gualdi, Stanislao, Wisdom of the Institutional Crowd (March 8, 2017). Available at SSRN: https://ssrn.com/abstract=2929877 or http://dx.doi.org/10.2139/ssrn.2929877

Kevin Primicerio (Contact Author)

CentraleSupélec ( email )

Labo M.A.S
Grande Voie des Vignes
Châtenay-Malabry CEDEX, 92295
France

Damien Challet

CentraleSupélec ( email )

Labo MICS
3, rue Joliot-Curie
Gif-sur-Yvette, 91192
France

Encelade Capital SA ( email )

Chemin du Bochet 8
Sulpice, 1025
Switzerland

Stanislao Gualdi

Capital Fund Management ( email )

23 rue de l'Université
Paris, 75007
France

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