IDEAS home Printed from https://ideas.repec.org/a/spr/joevec/v36y2026i1d10.1007_s00191-025-00922-9.html

Complementarity and substitutability of investment strategies

Author

Listed:
  • Nikolay Doskov

    (LGT Capital Partners)

  • Thorsten Hens

    (University of Zurich, Department of Finance
    NHH–Norwegian School of Economics, Department of Finance
    University of Lucerne, Department of Economics)

  • Klaus Reiner Schenk-Hoppé

    (NHH–Norwegian School of Economics, Department of Finance
    University of Manchester, Department of Economics, School of Social Sciences)

Abstract

This study quantifies the impact of a reallocation of capital between investment strategies on the cross section of their performance when capital flows are the sole transmission channel. The main finding of our counterfactual analysis is that the capacity of strategies, correlation of returns, and the cyclical nature of investment strategies’ risk premia can be explained by the self- and cross-impact caused by simple capital reallocation in an evolutionary finance model.

Suggested Citation

  • Nikolay Doskov & Thorsten Hens & Klaus Reiner Schenk-Hoppé, 2026. "Complementarity and substitutability of investment strategies," Journal of Evolutionary Economics, Springer, vol. 36(1), pages 1-25, April.
    • Handle: RePEc:spr:joevec:v:36:y:2026:i:1:d:10.1007_s00191-025-00922-9
    DOI: 10.1007/s00191-025-00922-9
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s00191-025-00922-9
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s00191-025-00922-9?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Jean-Philippe Bouchaud & Yuval Gefen & Marc Potters & Matthieu Wyart, 2004. "Fluctuations and response in financial markets: the subtle nature of 'random' price changes," Quantitative Finance, Taylor & Francis Journals, vol. 4(2), pages 176-190.
    2. Victor Le Coz & Iacopo Mastromatteo & Damien Challet & Michael Benzaquen, 2024. "When is cross impact relevant?," Quantitative Finance, Taylor & Francis Journals, vol. 24(2), pages 265-279, February.
    3. Igor Evstigneev & Thorsten Hens & Klaus Schenk-Hoppé, 2006. "Evolutionary stable stock markets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 27(2), pages 449-468, January.
    4. Fama, Eugene F. & French, Kenneth R., 2015. "A five-factor asset pricing model," Journal of Financial Economics, Elsevier, vol. 116(1), pages 1-22.
    5. Evstigneev, Igor V. & Hens, Thorsten & Schenk-Hoppé, Klaus Reiner, 2008. "Globally evolutionarily stable portfolio rules," Journal of Economic Theory, Elsevier, vol. 140(1), pages 197-228, May.
    6. Clifford S. Asness & Tobias J. Moskowitz & Lasse Heje Pedersen, 2013. "Value and Momentum Everywhere," Journal of Finance, American Finance Association, vol. 68(3), pages 929-985, June.
    7. Owen A. Lamont & Jeremy C. Stein, 2004. "Aggregate Short Interest and Market Valuations," American Economic Review, American Economic Association, vol. 94(2), pages 29-32, May.
    8. Rama Cont & Mihai Cucuringu & Chao Zhang, 2021. "Cross-Impact of Order Flow Imbalance in Equity Markets," Papers 2112.13213, arXiv.org, revised Jun 2023.
    9. Mehdi Tomas & Iacopo Mastromatteo & Michael Benzaquen, 2022. "How to build a cross-impact model from first principles: Theoretical requirements and empirical results," Post-Print hal-02567489, HAL.
    10. Mehdi Tomas & Iacopo Mastromatteo & Michael Benzaquen, 2020. "How to build a cross-impact model from first principles: Theoretical requirements and empirical results," Papers 2004.01624, arXiv.org, revised Mar 2022.
    11. Huang, Shiyang & Song, Yang & Xiang, Hong, 2024. "The Smart Beta Mirage," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 59(6), pages 2515-2546, September.
    12. Brian H. Boyer, 2011. "Style‐Related Comovement: Fundamentals or Labels?," Journal of Finance, American Finance Association, vol. 66(1), pages 307-332, February.
    13. Mehdi Tomas & Iacopo Mastromatteo & Michael Benzaquen, 2022. "How to build a cross-impact model from first principles: theoretical requirements and empirical results," Quantitative Finance, Taylor & Francis Journals, vol. 22(6), pages 1017-1036, June.
    14. Patton, Andrew J. & Weller, Brian M., 2020. "What you see is not what you get: The costs of trading market anomalies," Journal of Financial Economics, Elsevier, vol. 137(2), pages 515-549.
    15. Frazzini, Andrea & Lamont, Owen A., 2008. "Dumb money: Mutual fund flows and the cross-section of stock returns," Journal of Financial Economics, Elsevier, vol. 88(2), pages 299-322, May.
    16. Robert Novy-Marx & Mihail Velikov, 2016. "A Taxonomy of Anomalies and Their Trading Costs," The Review of Financial Studies, Society for Financial Studies, vol. 29(1), pages 104-147.
    17. Paul A. Gompers & Andrew Metrick, 2001. "Institutional Investors and Equity Prices," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(1), pages 229-259.
    18. Rama Cont & Mihai Cucuringu & Chao Zhang, 2023. "Cross-impact of order flow imbalance in equity markets," Quantitative Finance, Taylor & Francis Journals, vol. 23(10), pages 1373-1393, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eduardo Abi Jaber & Eyal Neuman & Sturmius Tuschmann, 2024. "Optimal Portfolio Choice with Cross-Impact Propagators," Papers 2403.10273, arXiv.org, revised Feb 2026.
    2. Philippe van der Beck & Jean-Philippe Bouchaud & Dario Villamaina, 2024. "Ponzi Funds," Papers 2405.12768, arXiv.org.
    3. Natascha Hey & Eyal Neuman & Sturmius Tuschmann, 2025. "Nonparametric Estimation of Self- and Cross-Impact," Papers 2510.06879, arXiv.org.
    4. Peress, Joël & Dong, Xi & KANG, NAMHO, 2020. "Fast and Slow Arbitrage: Fund Flows and Mispricing in the Frequency Domain," CEPR Discussion Papers 15235, C.E.P.R. Discussion Papers.
    5. Johannes Muhle-Karbe & Zexin Wang & Kevin Webster, 2024. "Stochastic Liquidity as a Proxy for Nonlinear Price Impact," Operations Research, INFORMS, vol. 72(2), pages 444-458, March.
    6. Söhnke M. Bartram & Harald Lohre & Peter F. Pope & Ananthalakshmi Ranganathan, 2021. "Navigating the factor zoo around the world: an institutional investor perspective," Journal of Business Economics, Springer, vol. 91(5), pages 655-703, July.
    7. Chapkovski, Philipp & Cordoni, Francesco & Giannetti, Caterina & Lillo, Fabrizio, 2025. "Cross−impact and price bubbles in hybrid financial markets," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 118(C).
    8. Hai Duong & Bart Taub, 2026. "The value of information flows in the stock market," Annals of Finance, Springer, vol. 22(1), pages 1-41, June.
    9. Cakici, Nusret & Zaremba, Adam, 2022. "Salience theory and the cross-section of stock returns: International and further evidence," Journal of Financial Economics, Elsevier, vol. 146(2), pages 689-725.
    10. Adam Zaremba & Jacob Koby Shemer, 2018. "Price-Based Investment Strategies," Springer Books, Springer, number 978-3-319-91530-2, October.
    11. Kozak, Serhiy & Nagel, Stefan & Santosh, Shrihari, 2020. "Shrinking the cross-section," Journal of Financial Economics, Elsevier, vol. 135(2), pages 271-292.
    12. Geertsema, Paul & Lu, Helen, 2020. "The correlation structure of anomaly strategies," Journal of Banking & Finance, Elsevier, vol. 119(C).
    13. Kan, Raymond & Wang, Xiaolu & Zheng, Xinghua, 2024. "In-sample and out-of-sample Sharpe ratios of multi-factor asset pricing models," Journal of Financial Economics, Elsevier, vol. 155(C).
    14. Marie Brière & Ariane Szafarz, 2021. "When it rains, it pours: Multifactor asset management in good and bad times," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 44(3), pages 641-669, September.
    15. Calvet, Laurent E. & Betermier, Sebastien & Jo, Evan, 2019. "A Supply and Demand Approach to Equity Pricing," CEPR Discussion Papers 13974, C.E.P.R. Discussion Papers.
    16. Hanauer, Matthias X. & Jansen, Maarten & Swinkels, Laurens & Zhou, Weili, 2024. "Factor models for Chinese A-shares," International Review of Financial Analysis, Elsevier, vol. 91(C).
    17. Zaremba, Adam & Szyszka, Adam & Karathanasopoulos, Andreas & Mikutowski, Mateusz, 2021. "Herding for profits: Market breadth and the cross-section of global equity returns," Economic Modelling, Elsevier, vol. 97(C), pages 348-364.
    18. Chiah, Mardy & Long, Huaigang & Zaremba, Adam & Umar, Zaghum, 2023. "Trade competitiveness and the aggregate returns in global stock markets," Journal of Economic Dynamics and Control, Elsevier, vol. 148(C).
    19. Schwarz, Patrick, 2025. "On the performance of volatility-managed equity factors — International and further evidence," Journal of Empirical Finance, Elsevier, vol. 80(C).
    20. Fletcher, Jonathan, 2021. "International equity U.S. mutual funds and diversification benefits," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 246-257.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:joevec:v:36:y:2026:i:1:d:10.1007_s00191-025-00922-9. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.