Séminaire ED – Claude Fluet (Université Laval)
De 16:00 à 17:00
Détails de l'événement :
“Consumer Protection in Retail Investments: Are `Market Adjusted Damages’ Efficient?”
Market adjusted damages (MAD), also known by many other names, is the most common form of redress for investors awarded compensation for unsuitable financial advice or portfolio mismanagement. Damages are computed as the difference between realized payoffs and what would have been received under an ex ante suitable portfolio given the investor’s needs, i.e., returns are adjusted according to the actual performance of the market. I analyze the properties of this formula from three perspectives: (i) providing full compensatory expectation damages; (ii) as optimal insurance coverage against erroneous advice or mismanagement; (iii) as efficient liability incentives for financial experts to deliver reliable advice and management. I show that each of these objectives is consistent with a different variant of the MAD formula. A common feature is that investors ultimately bear the cost of redress and will behave opportunistically because they are often better off ex post with an unsuitable portfolio.
About Claude Fluet: https://www4.fsa.ulaval.ca/enseignant/claude-denys-fluet/