Portfolio managers must maximize expected utility under asymmetric information and value at risk (VaR) constraints. Analyzing the solution shows that in volatile markets, the VaR constraint will have a stronger impact on manager performance than short-selling restrictions, particularly for more aggressive managers and those with better information. The results suggest sophisticated investors will see their performance more affected by VaR constraints than short-selling restrictions.
Portfolio managers must maximize expected utility under asymmetric information and value at risk (VaR) constraints. Analyzing the solution shows that in volatile markets, the VaR constraint will have a stronger impact on manager performance than short-selling restrictions, particularly for more aggressive managers and those with better information. The results suggest sophisticated investors will see their performance more affected by VaR constraints than short-selling restrictions.
Portfolio managers must maximize expected utility under asymmetric information and value at risk (VaR) constraints. Analyzing the solution shows that in volatile markets, the VaR constraint will have a stronger impact on manager performance than short-selling restrictions, particularly for more aggressive managers and those with better information. The results suggest sophisticated investors will see their performance more affected by VaR constraints than short-selling restrictions.
• It is a framework where portfolio managers maximize their expected utility
under asymmetric information, It is introduced as one of the most common restrictions (VaR constraints) faced by portfolio managers and provide an analytical solution to this complex problem. • Analyzing this solution with realistic values of parameters and comparing with the solution to a similar problem. • In volatile market, the VaR constraint will have a stronger impact than the short- selling restriction on the manager performance. In this situation, aggressive managers will be more affected by the VaR constraint. While the short-selling restriction tends to evenly affect all managers, the VaR restriction has a stronger impact on managers with good information quality. • These results suggest that sophisticated investors will see their performance more affected by VaR constraint than short-selling restriction.