||Cheung, Stephen L. (University of Sydney)
Coleman, Andrew (University of Sydney)
We study experimental markets in which participants face incentives modeled upon those prevailing in markets for managed funds. Each participant’s portfolio is periodically evaluated at market value and ranked in a league table according to short-term paper returns. Those who rank highly attract a larger share of new fund inflows. Under conditions in which prices are close to intrinsic value, the effect of incentives is mild. However under conditions in which markets are prone to bubble, mispricing is greatly exacerbated by incentives. Even in experienced markets, prices climb to levels clearly indicative of speculation and do not always crash back.
||league tables, price bubbles, managed funds markets, tournament incentives, asset market experiments
Summary by Yi-Nung (2011.12.31)
本文研究 “排行機制" 是否會使資產泡沫的情形更嚴重
…whether league-table incentives may contribute to the perpetuation of price bubbles in asset markets.
(p.5) … for league-table incentives to amplify price distortions in these markets
Such an event, and any ensuing crash back to intrinsic value, can have adverse consequences for the efficient allocation of capital, as well as distorting the distribution of wealth and propagating instability throughout the economy. For these reasons, the factors that contribute to the severity of price bubbles are of interest to policy makers and regulators.
為何要用實驗來研究 asset bubble 問題之原因:
an inherent difficulty of studying price bubbles using historical data is that an asset’s true intrinsic value is not observable even in retrospect. Thus any empirical assessment of a price bubble is necessarily contingent upon assumptions that must be made with regard to intrinsic value, leading to the possibility of specification error. As a result, there is always scope for disagreement over whether any given historical episode indeed constitutes a price bubble.
… a further challenge for empirical research is that the incentives facing market participants may be endogenous to the performance of the market under consideration, may differ between participants within a given market, and may in any case not be observable to the researcher.
… design of our experiments is based upon canonical studies by Smith, Suchanek and Williams (1988)(PDF) and Noussair, Robin and Ruffieux (2001)(PDF).
Baseline: 每人獲得每段期間 “與績效無關之" 固定報酬，
競賽 tournament: 每人獲得每段期間 “以帳面價值成長率為績效" 之報酬 (league-table incentives, 或 tournament incentives (James and Isaac. 2000, AER))
其它變因: experience in repeated markets, 不同的 market intrinsic value
In our baseline experiments, each trader receives identical periodic bonuses irrespective of their performance. These bonuses model the inflow of new funds under management, and in the baseline they do not vary as a function of relative performance. Thus under the baseline, a trader’s earnings depend only upon the intrinsic value of their holdings at the conclusion of the market. In our tournament condition, we introduce league-table incentives by allocating bonuses on the basis of each trader’s relative performance, as measured by the recent growth in the paper value of their portfolio. Once again, final earnings are assessed at intrinsic value; however the measure of return that is used to construct the league table is based upon market price. In this manner, we induce a tension between the pursuit of long-run and short-run measures of value under the tournament.
1. 在固定報酬值的環境下, 有價格泡沫; 但相對於遞減報酬值的環境下, 價格泡沫較小
In the constant-value environment with baseline incentives, we again observe that prices deviate somewhat above intrinsic value in inexperienced markets. However, and again consistent with previous research, these deviations are mild compared to what we observe in the declining-value environment.
2. 在固定報酬值的環境下且有經驗的市場中, 價格泡沫現象幾乎沒有
Moreover, in experienced markets with baseline incentives, prices track intrinsic value almost perfectly.
3. league-table incentive 下價格泡沫情況更趨嚴重
… confirms the potential for league-table incentives to amplify price distortions in these markets
A bubble in asset prices has been defined as “trade in high volumes at prices that are considerably at variance from intrinsic value” (King et al 1993, p.183).
James, D., R.M. Isaac. 2000. Asset markets: How are they affected by tournament incentives for individuals. American Economic Review. 90(4) 995–1004. [jstor.org提PDF]
這篇描述操作績效高於市場者, 其薪酬與績文呈正比; 但其它人則獲 flat rate 之薪酬