Essays on Strategic Behavior in Financial Markets

Alvaro Enrique Pedraza
This dissertation explores the role of strategic behavior in financial markets and highlights the effects of such behavior on portfolio choice, trading behavior and asset prices. In Chapter 1 I study portfolio choice of strategic fund managers in the presence of a peer-based underperformance penalty. While the penalty generates herding behavior, correlated trading among managers is exacerbated when a strategic setting is considered. The equilibrium portfolios are driven by the least restricted manager, who may...
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