Essays in asset management

Thesis

This thesis studies the real economic consequences of large-scale investment diversification and indexing in financial markets. In the first chapter, I show that diversified ownership causally reduces firm-level breakthrough innovation. As investors shift from individual stocks to diversified funds, their demand for skewed returns declines, leading firms to undertake fewer breakthrough innovation projects. The second chapter examines self-indexed ETFs, showing that these funds charge higher fees without delivering superior performance, consistent with conflicts of interest in advisory distribution channels. The third chapter tests whether firms adjust their behaviour to gain index inclusion using Russell index reconstitutions. I find no evidence of manipulation, supporting the validity of Russell index inclusion as a quasi-natural experiment. Overall, the thesis highlights that while diversification yields private benefits, it has important unintended effects on innovation, industry structure, and firm behaviour.

Authors: Limburg, A

• DOI: 10.5287/ora-ryv91n2qr
• Type of award: DPhil
• Level of award: Doctoral
• Awarding institution: University of Oxford
• Language: English
• Keywords: asset management; finance; economics
• Subjects: Industrial organization; Corporate governance