An Application of Evolutionary Finance to Firms Listed in the Swiss Market Index

Thorsten Hens, Klaus Reiner Schenk-Hoppé () and Martin Stalder

No iewwp128, IEW - Working Papers from Institute for Empirical Research in Economics - IEW

Abstract: This paper presents an application of evolutionary portfolio theory to stocks listed in the Swiss Market Index (SMI). We study numerically the long-run outcome of the competition of rebalancing rules for market shares in a stock market with actual dividends taken from firms listed in the SMI. Returns are endogenous because prices are determined by supply and demand stemming from the rebalancing rules. Our simulations show that in competition with rebalancing rules derived from Mean-Variance Optimization, Maximum Growth Theory and Behavioral Finance, the evolutionary portfolio rule discovered in Hens and Schenk-Hoppé (2001) will eventually hold total market wealth. According to this simple rule the portfolio weights should be proportional to the expected relative dividends of the assets.

Keywords: Evolutionary Finance; Behavioral Finance; CAPM; Rebalancing Rules; Growth Optimal Portfolio. (search for similar items in EconPapers)
JEL-codes: D52 D81 D83 G11 (search for similar items in EconPapers)
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Journal Article: An Application of Evolutionary Finance to Firms Listed in the Swiss Market Index (2002)
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Persistent link: http://EconPapers.repec.org/RePEc:zur:iewwpx:128

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