NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Matthijs Breugem

Collegio Carlo Alberto
Piazza Vicenzo Albarello 8
Torino, Italy

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Frankfurt School of Finance and Management

NBER Working Papers and Publications

June 2017Institutional Investors and Information Acquisition: Implications for Asset Prices and Informational Efficiency
with Adrian Buss: w23561
We jointly model the information choice and portfolio allocation problem of institutional investors who are concerned about their performance relative to a benchmark. Benchmarking increases an investor's effective risk-aversion, which reduces his willingness to speculate and, consequently, his desire to acquire information. In equilibrium, an increase in the fraction of benchmarked institutional investors leads to a decline in price informativeness, which can cause a decline in the prices of all risky assets and the market portfolio. The decline in price informativeness also leads to a substantial increase in return volatilities and allows non-benchmarked investors to substantially outperformed benchmarked investors.

Published: Matthijs Breugem & Adrian Buss, 2019. "Institutional Investors and Information Acquisition: Implications for Asset Prices and Informational Efficiency," The Review of Financial Studies, vol 32(6), pages 2260-2301.

 
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