This chapter gives an overview of current research in evolutionary -nance. We mainly focus on the survival and stability properties ofinvestment strategies associated with the Kelly rule. Our approach tothe study of the wealth dynamics of investment strategies is inspired byDarwinian ideas on...

In the presence of transactions costs, no matter how small, ar-bitrage activity does not necessarily render equal all riskless rates ofreturn. When two such rates follow stochastic processes, it is not opti-mal immediately to arbitrage out any discrepancy that arises betweenthem. The reason is...

Despite the enormous growth of the asset management industry during the pastdecades, little is known so far about the asset pricing implications of investmentintermediaries. Investment objectives of professional asset managers such as mutualfunds differ from those of private households. However,...

Consider an Rd-valued semimartingale S and a sequence of Rd-valuedS-integrable predictable processes Hn valued in some closed convex set K C Rd,containing the origin. Suppose that the real-valued sequence Hn * S converges toX in the semimartingale topology.[...]

Macroeconomic time series often involve a threshold effect in theirARMA representation, and exhibit long memory features. In this paperwe introduce a new class of threshold ARFIMA models to account forthis. The threshold effect is introduced in the autoregressive and/or thefractional integration...

This paper develops and empirically tests a model designed to distinguish the roleof real and …nancing frictions on fi…rms´investment, debt …nancing and equity …nancingpolicies. Real frictions include …xed costs of investment and adjustment costs. Financ-ing frictions include taxes,...

This paper aims to open a new avenue for research in continuoustimenancial market models with endogenous prices and heterogenousinvestors. The main result is the derivation of the limit of a discretetimeevolutionary stock market model as the length of the time periodtends to zero.[...]

The objective of this paper is to extend the results on Pseudo Maximum Likelihood(PML) theory derived in Gourieroux, Monfort, and Trognon (GMT)(1984) to a situation where the rst four conditional moments are specied.Such an extension is relevant in light of pervasive evidence that conditional...

We develop a new theory of international capital flows based on dispersed in-formation across individual investors. There is extensive evidence of informationheterogeneity within and across countries, which has proven critical to under-standing asset price behavior. We introduce information...

This article shows that, as long as agents are required to maintain positivewealth, the presence of portfolio constraints may give rise to asset pricingbubbles in equilibrium even if there are unconstrained agents in the economywho can benefit from the induced arbitrage opportunity. Furthermore,...