Finance Research Seminar - Professor Raman Uppal (EDHEC)
Professor Raman Uppal (EDHEC)
In-person
Evaluating the Impact of Portfolio Mandates
Internal seminar for researchers
Abstract: This paper evaluates the effectiveness of portfolio mandates on capital allocation. We argue that a firm’s cost of capital is not a good measure of mandate effectiveness. Instead, evaluating the real impact of mandates requires examining their effect on sectoral capital allocation. Contrary to the prediction of endowment-based models, we show that mandates may have a negligible impact on the cost of capital and yet significantly influence the allocation of capital across sectors. Using a production-based model calibrated to match key asset-pricing and macroeconomic moments, we estimate that a significant portion of the mandate remains effective in shaping equilibrium capital allocation, even when there is little disparity in the cost of capital across sectors.
Contact information
You can read more about Raman on the EDHEC website.