Evolutionary finance: A model with endogenous asset payoffs

Igor V. Evstigneev, Thorsten Hens and Mohammad Javad Vanaei
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Igor V. Evstigneev: University of Manchester - Economics, School of Social Sciences
Thorsten Hens: University of Zurich - Department of Banking and Finance; Norwegian School of Economics and Business Administration (NHH); Swiss Finance Institute
Mohammad Javad Vanaei: University of Manchester

No 22-96, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: Evolutionary Finance (EF) explores financial markets as evolving biological systems. Investors pursuing diverse investment strategies compete for the market capital. Some "survive" and some "become extinct". A central goal is to identify evolutionary stable (in one sense or another) investment strategies. The problem is analyzed in a framework combining stochastic dynamics and evolutionary game theory. Most of the models currently considered in EF assume that asset payo¤s are exogenous and depend only on the underlying stochastic process of states of the world. The present work develops a model where the payo¤s are endogenous: they depend on the share of total market wealth invested in the asset.

Keywords: Evolutionary Finance; endogenous asset payoffs (search for similar items in EconPapers)
JEL-codes: D53 E21 G11 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2022-12, Revised 2023-05
New Economics Papers: this item is included in nep-evo, nep-fmk, nep-gth and nep-hme
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2296

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