We derive equilibrium asset prices when fund managers deviate from benchmark indices to exploit noise-trader induced … distortions but fund investors constrain these deviations. Because constraints force managers to buy assets that they underweight …. Noise traders bias prices upward because constraints make it harder for managers to underweight overvalued assets, which …

result of powerful managers setting their own pay. Others interpret high pay as the result of optimal contracting in a …

managers. Flows respond quickly and strongly to performance; lagged performance has a monotonically decreasing impact on flows … times as large as direct incentives from incentive fees and returns to managers' own investment in the fund. For new funds … generated for their investors in a given year, managers receive close to another dollar in direct performance fees plus the …

of the typical American firm. Variable pay is usually touted as a way to provide incentives to managers whose interests … received much attention, but that is consistent with may of the facts, is selection. Managers and industry specialists may have … information about a firm's prospects that is unavailable to outside investors. In order to induce managers to be truthful about …

executive officers. However, firms are run by teams of managers, and a theory of the firm should also explain the distribution …