This paper analyzes the impact of convex incentives in delegated portfolio management on the prices and volatility of risky assets using a theoretical model within a continuous-time financial framework. A multiple-stock dynamic equilibrium pricing model is constructed, where institutional and retail investors have heterogeneous beliefs, and the institutional investors face convex incentives associated with a benchmark portfolio’s performance. On this basis, using the martingale method, the closed-form solutions for the risky assets’equilibrium prices and volatility are derived. Finally, numerical results show that the stock in the benchmark portfolio has a higher price and volatility than the stock that is not included. Convex incentives for institutional investors can always boost risky asset prices and the volatility of stocks in benchmark portfolio. When institutional investors are more pessimistic than retail investors, an increase in convex incentives will reduce the volatility of stocks not in the benchmark portfolio, and an increase in institutional market share will reduce the degree of bubble of stock not in benchmark portfolio.