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Finance Seminar: Andrea Buffa, Boston University

Thursday, April 19, 2018
4:00pm to 5:00pm
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Baxter B125
Institutional Investors, Heterogeneous Benchmarks and the Comovement of Asset Prices
Andrea Buffa, Assistant Professor of Finance, Boston University,

We study the equilibrium implications of a multi-asset economy in which asset managers are each subject to a different benchmark. We demonstrate how heterogeneous benchmarking endogenously generates a mechanism through which fundamental shocks propagate across assets. Asset managers' capital invested for benchmarking purposes enters the pricing kernel and fluctuations in this capital induce price pressure that can result in negative spillovers across asset returns. We study the equilibrium properties of benchmarking-induced negative spillovers by analyzing shock elasticities and cross-elasticities of price-dividend ratios and asset managers' market shares. Our results, which are obtained in closed-form, are also in line with the weakened correlation across industry-sector portfolios and investment styles over short horizons, and provide new testable implications on the established asset-class" effect. An asset that is included in a benchmark may not only comove negatively with assets included in a different benchmark, but also with assets belonging to the same benchmark.

Finance Seminars at Caltech are funded through the generous support of The Ronald and Maxine Linde Institute of Economic and Management Sciences ( and Stephen A. Ross.

For more information, please contact Sabrina De Jaegher by phone at 626-395-4228 or by email at