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Market Selection and Survival of Investment Strategies

Author

Listed:
  • 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)

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.

Suggested Citation

  • Rabah Amir & Igor V. Evstigneev & Thorsten Hens & Klaus Reiner Schenk-Hoppé, 2002. "Market Selection and Survival of Investment Strategies," Discussion Papers 02-16, University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:kuiedp:0216
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    Keywords

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    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; Information and Knowledge; Communication; Belief; Unawareness
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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