Von Neumann-Gale Dynamics, Market Frictions, and Capital Growth

E. Babaei, I.V. Evstigneev, Klaus Schenk-Hoppé and M.V. Zhitlukhin

Economics Discussion Paper Series from Economics, The University of Manchester

Abstract: The aim of this work is to extend the classical capital growth theory pertaining to frictionless financial markets to models taking into account various kinds of frictions, including transaction costs and portfolio constraints. A natural generalization of the notion of a benchmark investment strategy (Platen, Heath and others) is proposed, and it is shown how such strategies can be used for the analysis of growth-optimal investments. The analysis is based on the classical von Neumann-Gale model of economic growth, a stochastic version of which is used in this study as a framework for the modeling of financial markets with frictions.

JEL-codes: C61 C62 G10 O41 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-fdg
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Persistent link: https://EconPapers.repec.org/RePEc:man:sespap:1816

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