Abstract
This paper examines the strategic interaction of n portfolio managers with relative performance concerns. We characterize the unique constant Nash equilibrium and derive some compelling results. Surprisingly, in equilibrium, more risk tolerant players do not generally take riskier positions than less risk tolerant players. We derive sufficient conditions under which this relation does hold. We also examine the effects of adding new players to the game on the equilibrium, and look at the equilibrium in the limiting case as the number of players goes to infinity. We show that for a symmetric population, the equilibrium strategy of the players converges pointwise to some limiting equilibrium policy.
Original language | English (US) |
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Pages (from-to) | 205-231 |
Number of pages | 27 |
Journal | Annals of Finance |
Volume | 15 |
Issue number | 2 |
DOIs | |
State | Published - Jun 1 2019 |
Externally published | Yes |
Keywords
- Behavioral finance
- Continuous-time finance
- Portfolio choice
- Relative concerns
ASJC Scopus subject areas
- Finance
- Economics, Econometrics and Finance(all)