Adaptive Learning in Financial Markets

Posted: 20 Oct 1999

See all articles by Bryan Routledge

Bryan Routledge

Carnegie Mellon University - David A. Tepper School of Business


We investigate adaptive or evolutionary learning in a repeated version of the Grossman and Stiglitz (1980) model. We demonstrate that any process that is a monotonic selection dynamic will converge to the rational expectations asset demands if the proportion of informed traders is fixed. We also show that these learning processes have a unique asymptotically stable fixed point at the Grossman-Stiglitz (GS) equilibrium. The robustness of learning to noisy experimentation is studied using Binmore and Samuelson's (1995) deterministic drift approximation. Conditions on economic and learning process parameters for adaptive learning to lead to the GS rational expectations equilibrium are presented.

JEL Classification: G12, G14

Suggested Citation

Routledge, Bryan R., Adaptive Learning in Financial Markets. Review of Financial Studies, Vol. 12, Iss. 5. Available at SSRN:

Bryan R. Routledge (Contact Author)

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States
(412) 268-7588 (Phone)
(412) 268-7064 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
PlumX Metrics