The paper considers the equilibrium effects of an institutional investor whose performance is benchmarked to an index. In a partial equilibrium setting, the objective of the institutional investor is modelled as the maximization of expected utility (an increasing and concave function, in order...

This paper tests the cross-section implications of quot;keeping up with the Jonesesquot; (KUJ) preferences in an international setting. When agents have KUJ preferences, in the presence of un-diversifiable non-financial wealth, both world and domestic risk (the idiosyncratic component of...

The finance literature documents a relation between labor income and the cross-section of stock returns. One possible explanation for this is the hedging decisions of investors with relative wealth concerns. This implies a negative risk premium associated with stock returns correlated with local...

This paper surveys the literature that studies the connection between leverage and executive compensation. First, we discuss the dynamics of pay-for-performance compensation and how to measure it. Then we study the theoretical underpinnings of how firm leverage may be related to the compensation...

Using a direct estimate of income diversion for a large sample of Russian firms from 1999 through 2004, we show that an increase in tax enforcement after Putin's election in 2000 is associated with a decrease in the appropriation of private rents by insiders both in firms explicitly targeted as...

Many investors purchase open-end mutual funds through intermediaries, paying brokers and financial advisors for fund distribution and advice via alternative sale charge fee structures. We argue that the fee structure choice reveals valuable information about investors horizon. That allows...

This paper studies the effect of the number of cases of COVID-19 on stock returns from over 3,500 publicly listed firms headquartered across 167 regions in 10 European countries. We instrument the number of cases per million inhabitant in each region with its population, density, and the soccer...

This paper shows that portfolio constraints have important implications for management compensation and performance evaluation. In particular, in the presence of portfolio constraints, allowing for benchmarking can be beneficial. Benchmark design arises as an alternative effort inducement...