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Relative growth optimal strategies in an asset market game

Author

Listed:
  • Yaroslav Drokin

    (National Research University Higher School of Economics)

  • Mikhail Zhitlukhin

    (Steklov Mathematical Institute of the Russian Academy of Sciences)

Abstract

We consider a game-theoretic model of a market where investors compete for payoffs yielded by several assets. The main result consists in a proof of the existence and uniqueness of a strategy, called relative growth optimal, such that the logarithm of the share of its wealth in the total wealth of the market is a submartingale for any strategies of the other investors. It is also shown that this strategy is asymptotically optimal in the sense that it achieves the maximal capital growth rate when compared to competing strategies. Based on the results obtained, we study the asymptotic structure of the market when all the investors use the relative growth optimal strategy.

Suggested Citation

  • Yaroslav Drokin & Mikhail Zhitlukhin, 2020. "Relative growth optimal strategies in an asset market game," Annals of Finance, Springer, vol. 16(4), pages 529-546, December.
    • Handle: RePEc:kap:annfin:v:16:y:2020:i:4:d:10.1007_s10436-020-00360-6
    DOI: 10.1007/s10436-020-00360-6
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    References listed on IDEAS

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    Cited by:

    1. Mikhail Zhitlukhin, 2021. "Asymptotically optimal strategies in a diffusion approximation of a repeated betting game," Papers 2108.11998, arXiv.org.
    2. Mikhail Zhitlukhin, 2020. "Asymptotic minimization of expected time to reach a large wealth level in an asset market game," Papers 2007.04909, arXiv.org.
    3. Mikhail Zhitlukhin, 2020. "A continuous-time asset market game with short-lived assets," Papers 2008.13230, arXiv.org.
    4. Mikhail Zhitlukhin, 2022. "A continuous-time asset market game with short-lived assets," Finance and Stochastics, Springer, vol. 26(3), pages 587-630, July.
    5. Mikhail Zhitlukhin, 2021. "Capital growth and survival strategies in a market with endogenous prices," Papers 2101.09777, arXiv.org.

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    More about this item

    Keywords

    Relative growth optimal strategy; Asset market game; Evolutionary finance; Martingale convergence;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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