We propose a model of asset management in which benchmarking arises endogenously, and analyze its unintended welfare … asset prices. Benchmarking inflates asset prices and gives rise to crowded trades, thereby reducing the effectiveness of …, recognizing the crowding, opts for less benchmarking and less incentive provision. We also show that asset management costs are …

benchmarks, and demonstrate how heterogeneous benchmarking generates a mechanism through which fundamental shocks propagate … across assets. Fluctuations in asset managers' capital invested for benchmarking purposes, scaled by the size of the economy … these benchmarking-induced spillovers by analyzing shock elasticities and cross-elasticities of price-dividend ratios, and …