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Evolutionary Behavioural Finance: A Model with Endogenous Asset Payoffs

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  • Igor V. Evstigneev
  • Mohammad Javad Vanaei

Abstract

The paper explores financial market dynamics from evolutionary and behavioural perspectives. Most of the studies on this topic deal with models in which asset payo¤s are exogenous and depend only on the underlying stochastic process of states of the world. The present work proposes a model in which the payoffs of assets are endogenous: they depend on the share of total market wealth invested in the asset.

Suggested Citation

  • Igor V. Evstigneev & Mohammad Javad Vanaei, 2022. "Evolutionary Behavioural Finance: A Model with Endogenous Asset Payoffs," Economics Discussion Paper Series 2202, Economics, The University of Manchester.
    • Handle: RePEc:man:sespap:2202
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    File URL: http://hummedia.manchester.ac.uk/schools/soss/economics/discussionpapers/EDP-2202.pdf
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    References listed on IDEAS

    as
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    2. Rabah Amir & Igor V. Evstigneev & Thorsten Hens & Valeriya Potapova & Klaus R. Schenk-Hoppé, 2021. "Evolution in pecunia," Proceedings of the National Academy of Sciences, Proceedings of the National Academy of Sciences, vol. 118(26), pages 2016514118-, June.
    3. Robert J. Aumann, 2019. "A synthesis of behavioural and mainstream economics," Nature Human Behaviour, Nature, vol. 3(7), pages 666-670, July.
    4. Rabah Amir & Igor Evstigneev & Klaus Schenk-Hoppé, 2013. "Asset market games of survival: a synthesis of evolutionary and dynamic games," Annals of Finance, Springer, vol. 9(2), pages 121-144, May.
    5. Fuhito Kojima, 2006. "Stability and instability of the unbeatable strategy in dynamic processes," International Journal of Economic Theory, The International Society for Economic Theory, vol. 2(1), pages 41-53, March.
    6. Radner, Roy, 1972. "Existence of Equilibrium of Plans, Prices, and Price Expectations in a Sequence of Markets," Econometrica, Econometric Society, vol. 40(2), pages 289-303, March.
    7. Igor V. Evstigneev & Thorsten Hens & Klaus Reiner Schenk-Hoppé, 2015. "Mathematical Financial Economics," Springer Texts in Business and Economics, Springer, edition 127, number 978-3-319-16571-4, January.
    8. Martin Shubik & Gerald L. Thompson, 1959. "Games of economic survival," Naval Research Logistics Quarterly, John Wiley & Sons, vol. 6(2), pages 111-123, June.
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