Asset Price Effects of Peer Benchmarking
This paper estimates the effects of peer benchmarking by institutional investors on asset prices. To identify trades purely due to peer benchmarking as separate from those based on fundamentals or private information, the paper exploits a natural experiment involving a change in a government imposed underperformance penalty applicable to Colombian pension funds. This change in regulation is orthogonal to stock fundamentals and only affects incentives to track peer portfolios allowing the authors to identify the component of demand due to peer benchmarking. The authors find that peer effects among pension fund managers generate excess in stock return volatility, with stocks exhibiting short-term abnormal returns followed by returns reversal in the subsequent quarter. Additionally, peer benchmarking produces an excess in comovement across stock returns beyond the correlation implied by fundamentals.
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dig-okr-10986218532024-08-08T13:27:05Z Asset Price Effects of Peer Benchmarking Evidence from a Natural Experiment Acharya, Sushant Pedraza, Alvaro INDIVIDUAL ACCOUNTS STOCK PRICES RISKS HOLDING LARGE INSTITUTIONAL INVESTORS MARKET STRUCTURE BENCHMARK INDEX FUND MANAGER RETURN VOLATILITY MARKET PORTFOLIO STOCK PENSION FUND MANAGERS FUND MANAGERS PORTFOLIO HOLDING INTEREST INSTITUTIONAL INVESTORS RATE OF RETURN TRADING VOLUME GUARANTEES ASSET PRICES PENSION SYSTEMS EMERGING ECONOMIES PORTFOLIO CHOICE EXCHANGE STOCK MARKET LIQUIDITY DOMESTIC MARKET ASSET POLITICAL ECONOMY EQUITY SECURITIES ARS PORTFOLIO BOOK VALUE EQUITY RETURNS MUTUAL FUNDS ASSET MANAGEMENT BENCHMARKS MOMENTUM INVESTMENT STRATEGIES PENSION SYSTEM STOCK DATA PENSION REFORMS DUMMY VARIABLE RESERVE ASSET RETURNS BANKRUPTCY MONEY MANAGERS INTERNATIONAL BANK PENSION FUND SHARE INSTRUMENTS SHORT-TERM RETURN PRICE DISCOVERY MARKET PARTICIPANTS FUND PORTFOLIOS INVESTMENT BEHAVIOR PORTFOLIO RETURNS FUND BEHAVIOR RESERVE BANK FINANCIAL STUDIES MOMENTUM TRADING PORTFOLIOS PRICE VOLATILITY TRADING DEBT MARKETS RETURN INVESTMENT OPPORTUNITIES ASSET CLASSES WINDOW DRESSING INVESTMENT STRATEGY PENSION FUNDS FINANCE TRANSACTIONS EQUITY SP INVESTORS MONEY MANAGEMENT FEDERAL RESERVE VALUATIONS VALUE OF ASSETS SYSTEMIC RISK FEDERAL RESERVE BANK VOLATILITY BEHAVIORAL FINANCE MARKET CAPITALIZATION MARKET FAILURES STOCK RETURN FUTURE RETURNS ABNORMAL RETURNS MARKET INDEX FUND INVESTMENT MUTUAL FUND HERDING INDIVIDUAL ACCOUNT CAPITALIZATION ASSET PRICING PORTFOLIO ALLOCATION ASSETS MARKET BENCHMARK ASSET ALLOCATION INDIVIDUAL SECURITIES SECURITIES FEDERAL RESERVE SYSTEM HOLDINGS INSURANCE GOVERNMENT DEBT PORTFOLIO STRATEGIES INVESTMENT STRATEGIES EQUITY MUTUAL FUNDS INTERESTS INVESTOR SECURITY PRICE PRESSURES SHORT-TERM MARKET MUTUAL FUND STOCKS STOCK EXCHANGE INVESTMENT RISK SHARE FINANCIAL MARKETS BPS PORTFOLIO HOLDINGS RISK TAKING STOCK PRICE ASSETS UNDER MANAGEMENT PRICE OF STOCKS MARKET INTEGRATION SUPERVISORY AGENCY PENSION FUND STOCK RETURNS INSTRUMENT MUTUAL FUND BEHAVIOR REDEMPTION RISKS ARBITRAGE INDEX FUNDS GUARANTEE ASSET PRICE DEVELOPMENT BANK PORTFOLIO MANAGEMENT INDIVIDUAL STOCKS REDEMPTION INVESTING INVESTMENT DECISION This paper estimates the effects of peer benchmarking by institutional investors on asset prices. To identify trades purely due to peer benchmarking as separate from those based on fundamentals or private information, the paper exploits a natural experiment involving a change in a government imposed underperformance penalty applicable to Colombian pension funds. This change in regulation is orthogonal to stock fundamentals and only affects incentives to track peer portfolios allowing the authors to identify the component of demand due to peer benchmarking. The authors find that peer effects among pension fund managers generate excess in stock return volatility, with stocks exhibiting short-term abnormal returns followed by returns reversal in the subsequent quarter. Additionally, peer benchmarking produces an excess in comovement across stock returns beyond the correlation implied by fundamentals. 2015-05-04T19:58:37Z 2015-05-04T19:58:37Z 2015-04 Working Paper Document de travail Documento de trabajo http://documents.worldbank.org/curated/en/2015/04/24359081/asset-price-effects-peer-benchmarking-evidence-natural-experiment https://hdl.handle.net/10986/21853 English en_US Policy Research Working Paper;No. 7239 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank application/pdf World Bank, Washington, DC |
institution |
Banco Mundial |
collection |
DSpace |
country |
Estados Unidos |
countrycode |
US |
component |
Bibliográfico |
access |
En linea |
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dig-okr |
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biblioteca |
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America del Norte |
libraryname |
Biblioteca del Banco Mundial |
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English en_US |
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INDIVIDUAL ACCOUNTS STOCK PRICES RISKS HOLDING LARGE INSTITUTIONAL INVESTORS MARKET STRUCTURE BENCHMARK INDEX FUND MANAGER RETURN VOLATILITY MARKET PORTFOLIO STOCK PENSION FUND MANAGERS FUND MANAGERS PORTFOLIO HOLDING INTEREST INSTITUTIONAL INVESTORS RATE OF RETURN TRADING VOLUME GUARANTEES ASSET PRICES PENSION SYSTEMS EMERGING ECONOMIES PORTFOLIO CHOICE EXCHANGE STOCK MARKET LIQUIDITY DOMESTIC MARKET ASSET POLITICAL ECONOMY EQUITY SECURITIES ARS PORTFOLIO BOOK VALUE EQUITY RETURNS MUTUAL FUNDS ASSET MANAGEMENT BENCHMARKS MOMENTUM INVESTMENT STRATEGIES PENSION SYSTEM STOCK DATA PENSION REFORMS DUMMY VARIABLE RESERVE ASSET RETURNS BANKRUPTCY MONEY MANAGERS INTERNATIONAL BANK PENSION FUND SHARE INSTRUMENTS SHORT-TERM RETURN PRICE DISCOVERY MARKET PARTICIPANTS FUND PORTFOLIOS INVESTMENT BEHAVIOR PORTFOLIO RETURNS FUND BEHAVIOR RESERVE BANK FINANCIAL STUDIES MOMENTUM TRADING PORTFOLIOS PRICE VOLATILITY TRADING DEBT MARKETS RETURN INVESTMENT OPPORTUNITIES ASSET CLASSES WINDOW DRESSING INVESTMENT STRATEGY PENSION FUNDS FINANCE TRANSACTIONS EQUITY SP INVESTORS MONEY MANAGEMENT FEDERAL RESERVE VALUATIONS VALUE OF ASSETS SYSTEMIC RISK FEDERAL RESERVE BANK VOLATILITY BEHAVIORAL FINANCE MARKET CAPITALIZATION MARKET FAILURES STOCK RETURN FUTURE RETURNS ABNORMAL RETURNS MARKET INDEX FUND INVESTMENT MUTUAL FUND HERDING INDIVIDUAL ACCOUNT CAPITALIZATION ASSET PRICING PORTFOLIO ALLOCATION ASSETS MARKET BENCHMARK ASSET ALLOCATION INDIVIDUAL SECURITIES SECURITIES FEDERAL RESERVE SYSTEM HOLDINGS INSURANCE GOVERNMENT DEBT PORTFOLIO STRATEGIES INVESTMENT STRATEGIES EQUITY MUTUAL FUNDS INTERESTS INVESTOR SECURITY PRICE PRESSURES SHORT-TERM MARKET MUTUAL FUND STOCKS STOCK EXCHANGE INVESTMENT RISK SHARE FINANCIAL MARKETS BPS PORTFOLIO HOLDINGS RISK TAKING STOCK PRICE ASSETS UNDER MANAGEMENT PRICE OF STOCKS MARKET INTEGRATION SUPERVISORY AGENCY PENSION FUND STOCK RETURNS INSTRUMENT MUTUAL FUND BEHAVIOR REDEMPTION RISKS ARBITRAGE INDEX FUNDS GUARANTEE ASSET PRICE DEVELOPMENT BANK PORTFOLIO MANAGEMENT INDIVIDUAL STOCKS REDEMPTION INVESTING INVESTMENT DECISION INDIVIDUAL ACCOUNTS STOCK PRICES RISKS HOLDING LARGE INSTITUTIONAL INVESTORS MARKET STRUCTURE BENCHMARK INDEX FUND MANAGER RETURN VOLATILITY MARKET PORTFOLIO STOCK PENSION FUND MANAGERS FUND MANAGERS PORTFOLIO HOLDING INTEREST INSTITUTIONAL INVESTORS RATE OF RETURN TRADING VOLUME GUARANTEES ASSET PRICES PENSION SYSTEMS EMERGING ECONOMIES PORTFOLIO CHOICE EXCHANGE STOCK MARKET LIQUIDITY DOMESTIC MARKET ASSET POLITICAL ECONOMY EQUITY SECURITIES ARS PORTFOLIO BOOK VALUE EQUITY RETURNS MUTUAL FUNDS ASSET MANAGEMENT BENCHMARKS MOMENTUM INVESTMENT STRATEGIES PENSION SYSTEM STOCK DATA PENSION REFORMS DUMMY VARIABLE RESERVE ASSET RETURNS BANKRUPTCY MONEY MANAGERS INTERNATIONAL BANK PENSION FUND SHARE INSTRUMENTS SHORT-TERM RETURN PRICE DISCOVERY MARKET PARTICIPANTS FUND PORTFOLIOS INVESTMENT BEHAVIOR PORTFOLIO RETURNS FUND BEHAVIOR RESERVE BANK FINANCIAL STUDIES MOMENTUM TRADING PORTFOLIOS PRICE VOLATILITY TRADING DEBT MARKETS RETURN INVESTMENT OPPORTUNITIES ASSET CLASSES WINDOW DRESSING INVESTMENT STRATEGY PENSION FUNDS FINANCE TRANSACTIONS EQUITY SP INVESTORS MONEY MANAGEMENT FEDERAL RESERVE VALUATIONS VALUE OF ASSETS SYSTEMIC RISK FEDERAL RESERVE BANK VOLATILITY BEHAVIORAL FINANCE MARKET CAPITALIZATION MARKET FAILURES STOCK RETURN FUTURE RETURNS ABNORMAL RETURNS MARKET INDEX FUND INVESTMENT MUTUAL FUND HERDING INDIVIDUAL ACCOUNT CAPITALIZATION ASSET PRICING PORTFOLIO ALLOCATION ASSETS MARKET BENCHMARK ASSET ALLOCATION INDIVIDUAL SECURITIES SECURITIES FEDERAL RESERVE SYSTEM HOLDINGS INSURANCE GOVERNMENT DEBT PORTFOLIO STRATEGIES INVESTMENT STRATEGIES EQUITY MUTUAL FUNDS INTERESTS INVESTOR SECURITY PRICE PRESSURES SHORT-TERM MARKET MUTUAL FUND STOCKS STOCK EXCHANGE INVESTMENT RISK SHARE FINANCIAL MARKETS BPS PORTFOLIO HOLDINGS RISK TAKING STOCK PRICE ASSETS UNDER MANAGEMENT PRICE OF STOCKS MARKET INTEGRATION SUPERVISORY AGENCY PENSION FUND STOCK RETURNS INSTRUMENT MUTUAL FUND BEHAVIOR REDEMPTION RISKS ARBITRAGE INDEX FUNDS GUARANTEE ASSET PRICE DEVELOPMENT BANK PORTFOLIO MANAGEMENT INDIVIDUAL STOCKS REDEMPTION INVESTING INVESTMENT DECISION |
spellingShingle |
INDIVIDUAL ACCOUNTS STOCK PRICES RISKS HOLDING LARGE INSTITUTIONAL INVESTORS MARKET STRUCTURE BENCHMARK INDEX FUND MANAGER RETURN VOLATILITY MARKET PORTFOLIO STOCK PENSION FUND MANAGERS FUND MANAGERS PORTFOLIO HOLDING INTEREST INSTITUTIONAL INVESTORS RATE OF RETURN TRADING VOLUME GUARANTEES ASSET PRICES PENSION SYSTEMS EMERGING ECONOMIES PORTFOLIO CHOICE EXCHANGE STOCK MARKET LIQUIDITY DOMESTIC MARKET ASSET POLITICAL ECONOMY EQUITY SECURITIES ARS PORTFOLIO BOOK VALUE EQUITY RETURNS MUTUAL FUNDS ASSET MANAGEMENT BENCHMARKS MOMENTUM INVESTMENT STRATEGIES PENSION SYSTEM STOCK DATA PENSION REFORMS DUMMY VARIABLE RESERVE ASSET RETURNS BANKRUPTCY MONEY MANAGERS INTERNATIONAL BANK PENSION FUND SHARE INSTRUMENTS SHORT-TERM RETURN PRICE DISCOVERY MARKET PARTICIPANTS FUND PORTFOLIOS INVESTMENT BEHAVIOR PORTFOLIO RETURNS FUND BEHAVIOR RESERVE BANK FINANCIAL STUDIES MOMENTUM TRADING PORTFOLIOS PRICE VOLATILITY TRADING DEBT MARKETS RETURN INVESTMENT OPPORTUNITIES ASSET CLASSES WINDOW DRESSING INVESTMENT STRATEGY PENSION FUNDS FINANCE TRANSACTIONS EQUITY SP INVESTORS MONEY MANAGEMENT FEDERAL RESERVE VALUATIONS VALUE OF ASSETS SYSTEMIC RISK FEDERAL RESERVE BANK VOLATILITY BEHAVIORAL FINANCE MARKET CAPITALIZATION MARKET FAILURES STOCK RETURN FUTURE RETURNS ABNORMAL RETURNS MARKET INDEX FUND INVESTMENT MUTUAL FUND HERDING INDIVIDUAL ACCOUNT CAPITALIZATION ASSET PRICING PORTFOLIO ALLOCATION ASSETS MARKET BENCHMARK ASSET ALLOCATION INDIVIDUAL SECURITIES SECURITIES FEDERAL RESERVE SYSTEM HOLDINGS INSURANCE GOVERNMENT DEBT PORTFOLIO STRATEGIES INVESTMENT STRATEGIES EQUITY MUTUAL FUNDS INTERESTS INVESTOR SECURITY PRICE PRESSURES SHORT-TERM MARKET MUTUAL FUND STOCKS STOCK EXCHANGE INVESTMENT RISK SHARE FINANCIAL MARKETS BPS PORTFOLIO HOLDINGS RISK TAKING STOCK PRICE ASSETS UNDER MANAGEMENT PRICE OF STOCKS MARKET INTEGRATION SUPERVISORY AGENCY PENSION FUND STOCK RETURNS INSTRUMENT MUTUAL FUND BEHAVIOR REDEMPTION RISKS ARBITRAGE INDEX FUNDS GUARANTEE ASSET PRICE DEVELOPMENT BANK PORTFOLIO MANAGEMENT INDIVIDUAL STOCKS REDEMPTION INVESTING INVESTMENT DECISION INDIVIDUAL ACCOUNTS STOCK PRICES RISKS HOLDING LARGE INSTITUTIONAL INVESTORS MARKET STRUCTURE BENCHMARK INDEX FUND MANAGER RETURN VOLATILITY MARKET PORTFOLIO STOCK PENSION FUND MANAGERS FUND MANAGERS PORTFOLIO HOLDING INTEREST INSTITUTIONAL INVESTORS RATE OF RETURN TRADING VOLUME GUARANTEES ASSET PRICES PENSION SYSTEMS EMERGING ECONOMIES PORTFOLIO CHOICE EXCHANGE STOCK MARKET LIQUIDITY DOMESTIC MARKET ASSET POLITICAL ECONOMY EQUITY SECURITIES ARS PORTFOLIO BOOK VALUE EQUITY RETURNS MUTUAL FUNDS ASSET MANAGEMENT BENCHMARKS MOMENTUM INVESTMENT STRATEGIES PENSION SYSTEM STOCK DATA PENSION REFORMS DUMMY VARIABLE RESERVE ASSET RETURNS BANKRUPTCY MONEY MANAGERS INTERNATIONAL BANK PENSION FUND SHARE INSTRUMENTS SHORT-TERM RETURN PRICE DISCOVERY MARKET PARTICIPANTS FUND PORTFOLIOS INVESTMENT BEHAVIOR PORTFOLIO RETURNS FUND BEHAVIOR RESERVE BANK FINANCIAL STUDIES MOMENTUM TRADING PORTFOLIOS PRICE VOLATILITY TRADING DEBT MARKETS RETURN INVESTMENT OPPORTUNITIES ASSET CLASSES WINDOW DRESSING INVESTMENT STRATEGY PENSION FUNDS FINANCE TRANSACTIONS EQUITY SP INVESTORS MONEY MANAGEMENT FEDERAL RESERVE VALUATIONS VALUE OF ASSETS SYSTEMIC RISK FEDERAL RESERVE BANK VOLATILITY BEHAVIORAL FINANCE MARKET CAPITALIZATION MARKET FAILURES STOCK RETURN FUTURE RETURNS ABNORMAL RETURNS MARKET INDEX FUND INVESTMENT MUTUAL FUND HERDING INDIVIDUAL ACCOUNT CAPITALIZATION ASSET PRICING PORTFOLIO ALLOCATION ASSETS MARKET BENCHMARK ASSET ALLOCATION INDIVIDUAL SECURITIES SECURITIES FEDERAL RESERVE SYSTEM HOLDINGS INSURANCE GOVERNMENT DEBT PORTFOLIO STRATEGIES INVESTMENT STRATEGIES EQUITY MUTUAL FUNDS INTERESTS INVESTOR SECURITY PRICE PRESSURES SHORT-TERM MARKET MUTUAL FUND STOCKS STOCK EXCHANGE INVESTMENT RISK SHARE FINANCIAL MARKETS BPS PORTFOLIO HOLDINGS RISK TAKING STOCK PRICE ASSETS UNDER MANAGEMENT PRICE OF STOCKS MARKET INTEGRATION SUPERVISORY AGENCY PENSION FUND STOCK RETURNS INSTRUMENT MUTUAL FUND BEHAVIOR REDEMPTION RISKS ARBITRAGE INDEX FUNDS GUARANTEE ASSET PRICE DEVELOPMENT BANK PORTFOLIO MANAGEMENT INDIVIDUAL STOCKS REDEMPTION INVESTING INVESTMENT DECISION Acharya, Sushant Pedraza, Alvaro Asset Price Effects of Peer Benchmarking |
description |
This paper estimates the effects of peer
benchmarking by institutional investors on asset prices. To
identify trades purely due to peer benchmarking as separate
from those based on fundamentals or private information, the
paper exploits a natural experiment involving a change in a
government imposed underperformance penalty applicable to
Colombian pension funds. This change in regulation is
orthogonal to stock fundamentals and only affects incentives
to track peer portfolios allowing the authors to identify
the component of demand due to peer benchmarking. The
authors find that peer effects among pension fund managers
generate excess in stock return volatility, with stocks
exhibiting short-term abnormal returns followed by returns
reversal in the subsequent quarter. Additionally, peer
benchmarking produces an excess in comovement across stock
returns beyond the correlation implied by fundamentals. |
format |
Working Paper |
topic_facet |
INDIVIDUAL ACCOUNTS STOCK PRICES RISKS HOLDING LARGE INSTITUTIONAL INVESTORS MARKET STRUCTURE BENCHMARK INDEX FUND MANAGER RETURN VOLATILITY MARKET PORTFOLIO STOCK PENSION FUND MANAGERS FUND MANAGERS PORTFOLIO HOLDING INTEREST INSTITUTIONAL INVESTORS RATE OF RETURN TRADING VOLUME GUARANTEES ASSET PRICES PENSION SYSTEMS EMERGING ECONOMIES PORTFOLIO CHOICE EXCHANGE STOCK MARKET LIQUIDITY DOMESTIC MARKET ASSET POLITICAL ECONOMY EQUITY SECURITIES ARS PORTFOLIO BOOK VALUE EQUITY RETURNS MUTUAL FUNDS ASSET MANAGEMENT BENCHMARKS MOMENTUM INVESTMENT STRATEGIES PENSION SYSTEM STOCK DATA PENSION REFORMS DUMMY VARIABLE RESERVE ASSET RETURNS BANKRUPTCY MONEY MANAGERS INTERNATIONAL BANK PENSION FUND SHARE INSTRUMENTS SHORT-TERM RETURN PRICE DISCOVERY MARKET PARTICIPANTS FUND PORTFOLIOS INVESTMENT BEHAVIOR PORTFOLIO RETURNS FUND BEHAVIOR RESERVE BANK FINANCIAL STUDIES MOMENTUM TRADING PORTFOLIOS PRICE VOLATILITY TRADING DEBT MARKETS RETURN INVESTMENT OPPORTUNITIES ASSET CLASSES WINDOW DRESSING INVESTMENT STRATEGY PENSION FUNDS FINANCE TRANSACTIONS EQUITY SP INVESTORS MONEY MANAGEMENT FEDERAL RESERVE VALUATIONS VALUE OF ASSETS SYSTEMIC RISK FEDERAL RESERVE BANK VOLATILITY BEHAVIORAL FINANCE MARKET CAPITALIZATION MARKET FAILURES STOCK RETURN FUTURE RETURNS ABNORMAL RETURNS MARKET INDEX FUND INVESTMENT MUTUAL FUND HERDING INDIVIDUAL ACCOUNT CAPITALIZATION ASSET PRICING PORTFOLIO ALLOCATION ASSETS MARKET BENCHMARK ASSET ALLOCATION INDIVIDUAL SECURITIES SECURITIES FEDERAL RESERVE SYSTEM HOLDINGS INSURANCE GOVERNMENT DEBT PORTFOLIO STRATEGIES INVESTMENT STRATEGIES EQUITY MUTUAL FUNDS INTERESTS INVESTOR SECURITY PRICE PRESSURES SHORT-TERM MARKET MUTUAL FUND STOCKS STOCK EXCHANGE INVESTMENT RISK SHARE FINANCIAL MARKETS BPS PORTFOLIO HOLDINGS RISK TAKING STOCK PRICE ASSETS UNDER MANAGEMENT PRICE OF STOCKS MARKET INTEGRATION SUPERVISORY AGENCY PENSION FUND STOCK RETURNS INSTRUMENT MUTUAL FUND BEHAVIOR REDEMPTION RISKS ARBITRAGE INDEX FUNDS GUARANTEE ASSET PRICE DEVELOPMENT BANK PORTFOLIO MANAGEMENT INDIVIDUAL STOCKS REDEMPTION INVESTING INVESTMENT DECISION |
author |
Acharya, Sushant Pedraza, Alvaro |
author_facet |
Acharya, Sushant Pedraza, Alvaro |
author_sort |
Acharya, Sushant |
title |
Asset Price Effects of Peer Benchmarking |
title_short |
Asset Price Effects of Peer Benchmarking |
title_full |
Asset Price Effects of Peer Benchmarking |
title_fullStr |
Asset Price Effects of Peer Benchmarking |
title_full_unstemmed |
Asset Price Effects of Peer Benchmarking |
title_sort |
asset price effects of peer benchmarking |
publisher |
World Bank, Washington, DC |
publishDate |
2015-04 |
url |
http://documents.worldbank.org/curated/en/2015/04/24359081/asset-price-effects-peer-benchmarking-evidence-natural-experiment https://hdl.handle.net/10986/21853 |
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