Fund Tournaments and Asset Bubbles

Research output: Contribution to journalArticlepeer-review

13 Citations (Scopus)


This article studies how fund managers' relative-performance concerns affect their investment strategies in bubble periods. The managers compete for flows that are sensitive to their performance ranking. Severe ranking tournaments with highly convex flow-performance relationship lead managers to ride bubbles to outperform each other, making bubbles long-lived. However, moderate tournaments may lead them to attack bubbles quickly. The results are consistent with the observed cross-sectional variation in funds' investment strategies in bubble periods. Bubble-riding behavior is pronounced if the funds' tournament is too close to call, as interim followers try to catch up while interim leaders try to stay ahead.

Original languageEnglish
Pages (from-to)1383-1426
Number of pages44
JournalReview of Finance
Issue number4
Publication statusPublished - 2016 Jul 1
Externally publishedYes


  • D82
  • G14
  • G23

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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