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An evolutionary finance model with short selling and endogenous asset supply

Rabah Amir (), Sergei Belkov (), Igor V. Evstigneev () and Thorsten Hens ()
Additional contact information
Rabah Amir: University of Iowa
Sergei Belkov: University of Manchester
Igor V. Evstigneev: University of Manchester
Thorsten Hens: University of Zurich

Economic Theory, 2022, vol. 73, issue 2, No 13, 655-677

Abstract: Abstract Evolutionary finance focuses on questions of “survival and extinction” of investment strategies (portfolio rules) in the market selection process. It analyzes stochastic dynamics of financial markets in which asset prices are determined endogenously by a short-run equilibrium between supply and demand. Equilibrium is formed in each time period in the course of interaction of portfolio rules of competing market participants. A comprehensive theory of evolutionary dynamics of this kind has been developed for models in which short selling is not allowed and asset supply is exogenous. The present paper extends the theory to a class of models with short selling and endogenous asset supply.

Keywords: Evolutionary finance; Survival portfolio rules; Market games; Stochastic games (search for similar items in EconPapers)
JEL-codes: C73 D52 G11 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s00199-020-01269-x

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