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Evolutionary Finance Models with Short Selling and Endogenous Asset Supply

Author

Listed:
  • Sergei Belkov

    (University of Manchester)

  • Igor V. Evstigneev

    (University of Manchester)

  • Thorsten Hens

    (University of Zurich, Norwegian School of Economics and Business Administration (NHH), and Swiss Finance Institute)

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.

Suggested Citation

  • Sergei Belkov & Igor V. Evstigneev & Thorsten Hens, 2017. "Evolutionary Finance Models with Short Selling and Endogenous Asset Supply," Swiss Finance Institute Research Paper Series 17-26, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp1726
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    Cited by:

    1. Giulio Bottazzi & Daniele Giachini, 2020. "Selection in incomplete markets and the CAPM portfolio rule," LEM Papers Series 2020/29, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    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.

    More about this item

    Keywords

    Evolutionary finance; Survival portfolio rules; Random dynamical systems;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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