Abstract
The essential incentives for investment portfolio managers are pursing relative outstanding portfolio performance among their peers in order to be rewarded for investment fund inflows. This competition for fund inflows has becomes dynamic games among money managers. This paper accordingly proposes a new strategic asset allocation methodology by considering strategic interactions among portfolio managers with the dynamic consideration of incomplete information. To be specific, we extended the approach of Basak and Makarov (2012) by considering the case that portfolio managers make strategic asset allocation decisions under the situation of incomplete information using the framework of Bayesian (Nash) equilibrium.
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