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...

Hart proved the difficulty of deriving general comparative statics in portfolio weights. Instead, we derive new comparative statics for the distribution of payoffs: A is less risk averse than B iff A's payoff is always distributed as B's payoff plus a non-negative random variable plus...