We show that benchmark-linked convex incentives can lead risk-averse money managers aware of mispricing to over-invest in overpriced securities. In the model, the managers' risk-seeking behavior varies in response to the interaction of mispricing with convexity and benchmarking concerns....

We consider the problem of the optimal time to purchase a house by a risk-averse investor who has access to complete financial markets and whose objective is to maximize expected utility from wealth at some fixed horizon. The house purchase is financially attractive (due to tax advantages, for...