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This chapter gives an overview of current research in evolutionary finance. We mainly focus on the survival and stability properties of investment strategies associated with the Kelly rule. Our approach to the study of the wealth dynamics of investment strategies is inspired by Darwinian ideas...
Persistent link: https://www.econbiz.de/10003971097
This paper introduces and analyzes an evolutionary model of a financial market with a risk-free asset. Focus is on the study of local stability of the wealth dynamics through the application of recent results on the linearization and stability of random dynamical systems (Evstigneev, Pirogov and...
Persistent link: https://www.econbiz.de/10008797770
Evolutionary finance studies the dynamic interaction of investment strategies in financial markets. This market interaction generates a stochastic wealth dynamics on a heterogenous population of traders through the fluctuation of asset prices and their random payoffs. Asset prices are...
Persistent link: https://www.econbiz.de/10003961707
This paper studies the wealth dynamics of investors holding self-financing portfolios in a continuous-time model of a financial market. Asset prices are endogenously determined by market clearing. We derive results on the asymptotic dynamics of the wealth distribution and asset prices for...
Persistent link: https://www.econbiz.de/10003966074
This paper aims to open a new avenue for research in continuous-time financial market models with endogenous prices and heterogenous investors. The main result is the derivation of the limit of a discretetime evolutionary stock market model as the length of the time period tends to zero. The...
Persistent link: https://www.econbiz.de/10003966077
Standard strategic asset allocation procedures usually neglect market interaction. However, returns are not generated in a vacuum but are the result of the market's price discovery mechanism which is driven by investors' investment strategies. Evolutionary finance accounts for this and...
Persistent link: https://www.econbiz.de/10012800946
The paper shows how the standard two-period CAPM with exogenous wealth and exogenous returns can be extended inter-temporally by including the evolution of wealth from the Evolutionary Finance model of Evstigneev, Hens and Schenk-Hoppe (2011). The missing link between the two models is given by...
Persistent link: https://www.econbiz.de/10012800950
We introduce an evolutionary equilibrium asset pricing model with heterogeneous agents who can either act as brokers or hedge funds. Hedge funds can trade on margin, taking short or (leveraged) long positions in the assets. Brokers provide asset loans and credit to margin traders. In any...
Persistent link: https://www.econbiz.de/10011762225
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