Media coverage: The Economist, Bloomberg
Equilibrium consequences of fund managers’ compensation contracts include crowded trades, excessive benchmarking and excessive asset management costs. Through their use of benchmarks, fund investors impose externalities on each other. Socially optimal contracts diverge from privately optimal ones.
Firms included in popular benchmarks are effectively subsidized by asset managers. This “subsidy” comes from the inelastic demand of fund managers for stocks in their benchmark and it works through the cost of capital. A non-technical summary and media coverage: VoxEU, LBSR, Barron’s
An Asset-Pricing View of External Adjustment, 2010, Journal of International Economics, 80, pp. 144-156. (With Roberto Rigobon.) Supplementary Appendix.
The Role of Portfolio Constraints in the International Propagation of Shocks, 2008, Review of Economic Studies, 75, pp.1215-1256. (With Roberto Rigobon.) This paper was previously circulated under the title "Wealth Transfers, Contagion and Portfolio Constraints," NBER working paper No. 11440 and CEPR discussion paper No. 5117.
Multiplicity in General Financial Equilibrium with Portfolio Constraints, 2008, Journal of Economic Theory, 142, pp. 100-127. (With Suleyman Basak, David Cass, and Juan Manuel Licari.)
Offsetting the Implicit Incentives: Benefits of Benchmarking in Money Management, 2008, Journal of Banking and Finance, 32(9), pp. 1883-1893. (With Suleyman Basak and Alex Shapiro.) Awarded a London Business School Centre for Corporate Governance research grant, May 2007.
Optimal Asset Allocation and Risk Shifting in Money Management, 2007, Review of Financial Studies, 20(5), pp. 1583-1621. (With Suleyman Basak and Alex Shapiro.) Winner, Institute for Quantitative Research in Finance (Q Group) project funding award, 2003.
Asset Prices and Exchange Rates, 2007, Review of Financial Studies, 20(4), pp. 1139-1181. (With Roberto Rigobon.) This paper was previously circulated as NBER working paper No. 9834.
On Trees and Logs, 2004, Journal of Economic Theory, 116, pp. 41-83. (With David Cass.)
Monopoly Power and the Firm’s Valuation: A Dynamic Analysis of Short versus Long-Term Policies, 2004, Economic Theory, 24, pp. 503-530. (With Suleyman Basak.) This paper was previously circulated as CEPR discussion paper No. 3425.
Longer version reprinted in: Essays in Dynamic General Equilibrium Theory: Festschrift for David Cass, 2005, pp. 1-34, Studies in Economic Theory, vol. 20. Heidelberg and New York: Springer.
International Macro-Finance, 2013, in: Gerard Caprio (ed.) Handbook of Safeguarding Global Financial Stability: Political, Social, Cultural, and Economic Theories and Models, Vol. 2, pp. 169-176, Oxford: Elsevier Inc. (With Roberto Rigobon.)
Revise-and-Resubmit at the Journal of Financial Economics.
Swing Pricing (with Anil Kashyap, Natalia Kovrijnykh and Jian Li)
Designing ESG Benchmarks (with Anil Kashyap and Natalia Kovrijnykh)
Prices in Incentive Constraints (with Anil Kashyap, Natalia Kovrijnykh and Jian Li)