Asset price effects of peer benchmarking: Evidence from a natural experiment
We estimate the effects of peer benchmarking by institutional investors on asset prices. In order to isolate the trades driven by peer benchmarking, we use a natural experiment involving a change in a government-imposed under-performance penalty applicable to Colombian pension funds. We find that pe...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Elsevier Inc.
2019
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| Subjects: | |
| Online Access: | View Fulltext in Publisher |
| Summary: | We estimate the effects of peer benchmarking by institutional investors on asset prices. In order to isolate the trades driven by peer benchmarking, we use a natural experiment involving a change in a government-imposed under-performance penalty applicable to Colombian pension funds. We find that peer effects generate excess stock return volatility, with stocks exhibiting short-term abnormal returns followed by returns reversal in the subsequent quarter. Additionally, peer benchmarking produces an excess in comovement across stock returns beyond the correlation implied by fundamentals. © 2019 |
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| ISBN: | 10590560 (ISSN) |
| DOI: | 10.1016/j.iref.2019.02.012 |