Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments June 12, 2020 erstellt
Description:
N mutual funds compete for fund flows based on relative performance over their average returns, by choosing between an idiosyncratic and a common risky investment opportunities. The unique constant equilibrium is derived in closed form, which imply that most funds decrease the investments in their idiosyncratic risky assets under competition, in order to lower the risk of the relative performance. It pushes all funds to herd and hurts their after-fee Sharp ratios. If a fund is sufficiently disadvantaged in the competition with poor investment opportunities, its investment can be excessively risky, and pushes all funds further away from their average. However, the performance of the disadvantaged funds can improve comparing to the case without competition and benefits the investors