This paper develops a tractable dynamic model of competition between two risk-averse portfolio managers who attempt to … risk due to competition. Contrary to the standard result without competition, a higher risk aversion could well incentivize … more risk taking. We also show that competition can be conducive to asset specialization, and hence under …

Using detailed mutual fund holdings in the US market, we estimate active mutual fund managers’ loss aversion as a …. We further find managers' loss aversion is higher when past fund flows were high and lower when past fund flows were … that managers compete for greater inflows strategically while exhibiting self-interested choices …