Market Selection of Constant Proportions Investment Strategies in Continuous Time

Palczewski, Jan; Schenk-Hoppé, Klaus Reiner

doi:10.2139/ssrn.1288524

Market Selection of Constant Proportions Investment Strategies in Continuous Time

Swiss Finance Institute Research Paper No. 08-29

32 Pages Posted: 28 Oct 2008 Last revised: 18 Nov 2008

See all articles by Jan Palczewski

Jan Palczewski

University of Leeds - School of Mathematics

Klaus Reiner Schenk-Hoppé

University of Manchester - Department of Economics; Norwegian School of Economics (NHH) - Department of Finance

Date Written: September 19, 2008

Abstract

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

Suggested Citation: Suggested Citation

Palczewski, Jan and Schenk-Hoppé, Klaus Reiner, Market Selection of Constant Proportions Investment Strategies in Continuous Time (September 19, 2008). Swiss Finance Institute Research Paper No. 08-29. Available at SSRN: https://ssrn.com/abstract=1288524 or http://dx.doi.org/10.2139/ssrn.1288524