01831cas a2200253 a 4500 AALejournalIMF003257 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451860146 1018-5941 BD-DhAAL BD-DhAAL Chakravorti, Sujit. Managerial Incentives and Financial Contagion / Sujit Chakravorti, Subir Lall. Washington, D.C. : International Monetary Fund, 2004. 1 online resource (37 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper proposes a framework for comovements of asset prices with seemingly unrelated fundamentals, as an outcome of optimal portfolio strategies by fund managers. In emerging markets, dedicated managers outperforming a benchmark index and global managers maximizing absolute returns lead to systematic interactions between asset prices, without asymmetric information. The model determines optimal portfolio weights, the incidence of relative value strategies, and the systematic deviation of prices from fundamentals with limits to arbitraging this differential. Managerial compensation contracts, optimal at the firm level, may lead to inefficiencies at the macroeconomic level. Conditions are identified when shocks in one emerging market affect others. Mode of access: Internet Lall, Subir. IMF Working Papers; Working Paper ; No. 2004/199 Full text available on IMF http://elibrary.imf.org/view/journals/001/2004/199/001.2004.issue-199-en.xml IMF e-Library