SIMULTANEOUS- VERSUS SEQUENTIAL-MOVE TOURNAMENTS WITH HETEROGENEOUS AGENTS
Peter-J. Jost/Matthias Kräkel
This paper extends the discussion of simultaneous-move tournaments by focusing on the analysis of heterogeneous instead of homogeneous contestants. We show that the principal will not implement first-best efforts even though the agents are risk neutral and not limited in wealth, and despite the principal being able to implement an efficient outcome. At a second step, we compare our results with the equilibrium findings for sequential-move tournaments. We show that agents' strategic behavior differs significantly in the two setups. In the sequential-move tournament, an underdog can realize a first-mover advantage, but the underdog is never better off in the simultaneous-move tournament. We also discuss the principal's preferences for the different types of tournaments.
pp. 306 - 331
ESTIMATING THE GLOBAL MINIMUM VARIANCE PORTFOLIO
Alexander Kempf/Christoph Memmel
According to standard portfolio theory, the tangency portfolio is the only efficient stock portfolio. However, empirical studies show that an investment in the global minimum variance portfolio often yields better out-of-sample results than does an investment in the tangency portfolio and suggest investing in the global minimum variance portfolio. But little is known about the distributions of the weights and return parameters of this portfolio. Our contribution is to determine these distributions. By doing so, we answer several important questions in asset management.
pp. 332 - 348
RISK LOVE AND THE FAVORITE-LONGSHOT BIAS: EVIDENCE FROM GERMAN HARNESS HORSE RACING
Stefan Winter/Martin Kukuk
Empirical studies of horse race betting in the U.S., the UK, and Australia have established the so called favorite-longshot bias. Studies find that on average, bets on longshots lose much more than do bets on favorites. This means that longshots are overbet and favorites are underbet. By using a large data set of parimutuel harness horse races, we show that the favorite-longshot bias exists in Germany as well. We provide evidence that there is bias not only for simple win bets, but also for other types of bets as well, and that the bias is a time- and track-invariant phenomenon. The bias is consistent with the assumption of the (local) love of risk of the betting audience.
pp. 349 - 364
ANTECEDENTS OF THE PERFORMANCE OF MANAGEMENT CONSULTANTS
Ansgar Richter/Sascha L. Schmidt
We analyze the importance of both the level and the type of two critical dimensions of human capital for the performance of management consultants, namely education and experience. We use both qualitative and quantitative data on client ratings of the performance of 50 senior management consultants engaged in 100 consulting projects. Our empirical findings suggest that both the level and the type of education and experience are important for performance. In particular, experience within the consulting industry positively affects the performance of management consultants, but there are curvilinear effects on performance ratings of experience in occupations other than consulting.
pp. 365 - 391
