Evolutionary Finance and Dynamic Games

39 Pages Posted: 25 Jan 2010

See all articles by Rabah Amir

Rabah Amir

University of Arizona - Department of Economics; University of Arizona

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

Le Xu

University of Manchester

Date Written: January 14, 2010

Abstract

The paper examines a game-theoretic evolutionary model of an asset market with endogenous equilibrium asset prices. Assets pay dividends that are partially consumed and partially reinvested. The investors use general, adaptive strategies (portfolio rules), distributing their wealth between assets, depending on the exogenous states of the world and the observed history of the game. The main goal is to identify strategies, allowing an investor to "survive," i.e. to possess a positive, bounded away from zero, share of market wealth over the whole infinite time horizon. This work brings together recent studies on evolutionary finance with the classical topic of non-cooperative market games.

Keywords: evolutionary finance, dynamic games, stochastic games, survival strategies

JEL Classification: C73, D52, G11

Suggested Citation

Amir, Rabah and Evstigneev, Igor V. and Hens, Thorsten and Xu, Le, Evolutionary Finance and Dynamic Games (January 14, 2010). Swiss Finance Institute Research Paper No. 09-49. Available at SSRN: https://ssrn.com/abstract=1536724 or http://dx.doi.org/10.2139/ssrn.1536724

Rabah Amir (Contact Author)

University of Arizona - Department of Economics ( email )

Tucson, AZ 85721
United States

University of Arizona ( email )

Department of History
Tucson, AZ 85721
United States

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

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

Le Xu

University of Manchester ( email )

Oxford Road
Manchester, M13 9PL
United Kingdom

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