This paper uses agent-based simulation to analyze how financial markets are affected by market participants with convex incentives, e.g. option-like compensation. We document that convex incentives are associated with (i) higher prices, (ii) larger variations of prices, and (iii) larger bid-ask...

We examine the problem of setting optimal incentives for a portfolio manager hired by an investor who wants to induce ambiguity-robust portfolio choices with respect to estimation errors in expected returns. We consider a one-period model with a set of risky assets (with multivariate normal...

We propose a Reinforcement Learning (RL) algorithm for generating a trading strategy in a realistic setting, that includes transaction costs and factors driving the asset dynamics. We benchmark our algorithm against the analytical optimal solution, available when factors are linear and...

We investigate the performance of Socially Responsible Funds (SRFs) and Conventional Funds (CFs) in different market segments during the 1992-2012 period. From an unbalanced sample of more that 22,000 funds, we define a matched sample using a beta-distance measure to match any SRF with the...