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Market Selection and Survival of Investment Strategies

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Author Info
Rabah Amir (Center for Operations Research and Econometrics (CORE), Université Catholique de Louvain)
Igor V. Evstigneev (School of Economic Studies, University of Manchester)
Thorsten Hens (Institute for Empirical Research in Economics, University of Zürich)
Klaus Reiner Schenk-Hoppé (Institute of Economics, University of Copenhagen)

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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 understudy, asset payoffs depend on exogenous random factors. Market participants use dynamic investment strategies taking account of 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 University of Copenhagen. Department of Economics in its series Discussion Papers with number 02-16.

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Length: 22 pages
Date of creation: Oct 2002
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Handle: RePEc:kud:kuiedp:0216

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Related research
Keywords: evolutionary finance; 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

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References listed on IDEAS
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