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  


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.

Book Chapters

Working Papers



Revise-and-Resubmit at the Journal of Financial Economics.    

Best Paper Award at the 2023 Colorado Finance Summit

Work in Progress