The evaluation and compensation of portfolio managers is an important problem for practitioners. Optimal compensation will induce managers to expend effort to generate information and to use it appropriately in an informed portfolio choice. Our general model points the way towards analysis of...

In this paper we analyze the optimal contract for a portfolio manager who can exert effort to improve the quality of a private signal about future market prices. We assume complete markets over states distinguished by asset payoffs and place no restrictions on the form of the contract. We show...

This paper examines the feasibility of applying the stochastic discount factor methodology to fixed-income data using modern term structure models. Using this approach the researcher can examine returns on bond portfolios whose exact composition is unknown, as is often the case. This paper...

We study the use of stochastic discount factor (SDF) models in evaluating the investment performance of portfolio managers. By constructing artificial mutual funds with known levels of investment ability, we evaluate a large set of SDF models. We find that the measures of performance are not...

We study stochastic discount factor (SDF) models for evaluating investment performance. Constructing artificial funds with known levels of ability, we find that the measures of performance are not highly sensitive to the SDF model. Most of the models have a mild negative bias when performance is...

We study the use of stochastic discount factor (SDF) models in evaluating the investment performance of portfolio managers. By constructing artificial mutual funds with known levels of investment ability, we evaluate a large set of SDF models. We find that the measures of performance are not...