An Evolutionary Finance Model with Short Selling and Endogenous Asset Supply

29 Pages Posted: 13 Oct 2017 Last revised: 18 May 2020

See all articles by Rabah Amir

Rabah Amir

University of Iowa - Henry B. Tippie College of Business - Department of Economics

Sergei Belkov

The University of Manchester

Igor V. Evstigneev

University of Manchester - Economics, School of Social Sciences

Thorsten Hens

University of Zurich - Department of Banking and Finance; Norwegian School of Economics and Business Administration (NHH); Swiss Finance Institute

Date Written: October 11, 2017

Abstract

Evolutionary Finance focuses on questions of "survival and extinction" of investment strategies (portfolio rules) in the market selection process. It analyzes stochastic dynamics of financial markets in which asset prices are determined endogenously by a short-run equilibrium between supply and demand. Equilibrium is formed in each time period in the course of interaction of portfolio rules of competing market participants. A comprehensive theory of evolutionary dynamics of this kind has been developed for models in which short selling is not allowed and asset supply is exogenous. The present paper extends the theory to a class of models with short selling and endogenous asset supply.

Keywords: Evolutionary finance, Survival portfolio rules, Market games, Stochastic games

JEL Classification: C73, D52, G11

Suggested Citation

Amir, Rabah and Belkov, Sergei and Evstigneev, Igor V. and Hens, Thorsten, An Evolutionary Finance Model with Short Selling and Endogenous Asset Supply (October 11, 2017). Swiss Finance Institute Research Paper No. 17-28, Available at SSRN: https://ssrn.com/abstract=3051037 or http://dx.doi.org/10.2139/ssrn.3051037

Rabah Amir

University of Iowa - Henry B. Tippie College of Business - Department of Economics ( email )

108 Pappajohn Building
Iowa City, IA 52242
United States

Sergei Belkov

The University of Manchester ( email )

Manchester, N/A
United Kingdom

Igor V. Evstigneev

University of Manchester - Economics, School of Social Sciences ( email )

Oxford Road
Manchester, M13 9PL
United Kingdom
+44 161 2754275 (Phone)
+44 161 2754812 (Fax)

HOME PAGE: http://www.evstigneev.net

Thorsten Hens (Contact Author)

University of Zurich - Department of Banking and Finance ( email )

Plattenstrasse 32
Zurich, 8032
Switzerland
+41-44 634 37 06 (Phone)

Norwegian School of Economics and Business Administration (NHH)

Helleveien 30
Bergen, 5045
Norway

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

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