Optimal Benchmarking for Active Portfolio Managers - Essec

Within an agency theoretic framework, we solve simultaneously the manager’s and the investor’s dynamic optimization programs in a fairly general framework, and characterize the optimal benchmark. We then provide completely explicit solutions when the investor’s and the manager’s utility functions exhibit different CRRA parameters. It is never optimal for the manager, and therefore for the investor, to follow exactly the benchmark. We finally assess by simulation the practical importance of selecting a sub-optimal benchmark. Link to the article

LIOUI, A. and PONCET, P. (2013). Optimal Benchmarking for Active Portfolio Managers. European Journal of Operational Research, 226(1), pp. 268-276.

Keywords : #Approche-martingale, #Benchmarking, #Fonds-mutuels, #Modèle-principal, #agent, #Rémunération-du-gérant, #Temps-continu