Market Selection of Constant Proportions Investment Strategies in Continuous Time
32 Pages Posted: 28 Oct 2008 Last revised: 18 Nov 2008
Date Written: September 19, 2008
This paper studies the wealth dynamics of investors holding self-financing portfolios in a continuous-time model of a financial market. Asset prices are endogenously determined by market clearing. We derive results on the asymptotic dynamics of the wealth distribution and asset prices for constant proportions investment strategies. This study is the first step towards a theory of continuous-time asset pricing that combines concepts from mathematical finance and economics by drawing on evolutionary ideas.
Keywords: evolutionary finance, wealth dynamics, endogenous asset prices, random dynamical systems
JEL Classification: G11, G12
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