Fund managers - why the best might be the worst: On the evolutionary vigor of risk-seeking behavior

Björn-Christopher Witte

No 81, BERG Working Paper Series from Bamberg University, Bamberg Economic Research Group

Abstract: This article explores the influence of competitive conditions on the evolutionary fitness of different risk preferences. As a practical example, the professional competition between fund managers is considered. To explore how different settings of competition parameters, the exclusion rate and the exclusion interval, affect individual investment behavior, an evolutionary model based on a genetic algorithm is developed. The simulation experiments indicate that the influence of competitve conditions on investment behavior and attitudes towards risk is significant. What is alarming is that intense competitive pressure generates riskseeking behavior and undermines the predominance of the most skilled.

Keywords: risk preferences; competition; genetic programming; fund managers; portfolio theory (search for similar items in EconPapers)
JEL-codes: C73 D81 G11 G24 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-cbe, nep-cmp and nep-evo
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bamber:81

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