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Market selection and survival of investment strategies

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Author Info
AMIR, Rabah
EVSTIGNEEV, Igor
HENS, Thorsten
SCHENK-HOPPƒ, Klaus Reiner

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Abstract

The paper analyzes the process of market selection of investment strategies in an incomplete market of short-lived assets. In the model under study, asset payoffs depend on exogenous random factors. Market participants use dynamic investment strategies taking account of the available information about current and previous events. It is shown that an investor allocating wealth across the assets according to their conditional expected payoffs eventually accumulates total market wealth, provided the investor's strategy is asymptotically distinct from the portfolio rule suggested by the Capital Asset Pricing Model. This assumption turns out to be essentially necessary for the result.

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Publisher Info
Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2003099.

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Date of creation: 01 Dec 2003
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Handle: RePEc:cor:louvco:2003099

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Related research
Keywords: evolutionary Þnance; portfolio theory; CAPM; investment strategies; market selection; incomplete markets;

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Find related papers by JEL classification:
D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

References listed on IDEAS
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