Atlas models of equity markets

Adrian D. Banner, Robert Fernholz and Ioannis Karatzas

Papers from arXiv.org

Abstract: Atlas-type models are constant-parameter models of uncorrelated stocks for equity markets with a stable capital distribution, in which the growth rates and variances depend on rank. The simplest such model assigns the same, constant variance to all stocks; zero rate of growth to all stocks but the smallest; and positive growth rate to the smallest, the Atlas stock. In this paper we study the basic properties of this class of models, as well as the behavior of various portfolios in their midst. Of particular interest are portfolios that do not contain the Atlas stock.

Date: 2006-02
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Published in Annals of Applied Probability 2005, Vol. 15, No. 4, 2296-2330

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