A new working paper by Dimitri Vayanos and Paul Woolley suggests that using stock market indexes as benchmarks of investment performance causes most of the problems associated with asset pricing and asset management: risk/return inversion, short-termism, bubbles and crashes, and low returns. Intriguingly, momentum funds game benchmarked funds and exacerbate the distortions.
Press coverage: Financial Times; Morningstar (part 1 / part 2); Irish Times; Barron's; Reuters
