29 Pages Posted: 6 Jun 2015
Date Written: June 4, 2015
The paper reviews a new research field that develops evolutionary and behavioural approaches for the modeling of financial markets. The main objective is to create a plausible alternative to the conventional Walrasian equilibrium theory based on the hypothesis of full rationality of market players. Rather than maximizing typically unobservable individual utility functions, traders/investors are permitted to have a whole variety of patterns of strategic behaviour depending on their individual psychology. The models considered in this field combine elements of evolutionary game theory (solution concepts) and stochastic dynamic games (strategic frameworks).
Suggested Citation: Suggested Citation
Evstigneev, Igor V. and Hens, Thorsten and Schenk-Hoppé, Klaus Reiner, Evolutionary Behavioural Finance (June 4, 2015). Swiss Finance Institute Research Paper No. 15-16. Available at SSRN: https://ssrn.com/abstract=2615008 or http://dx.doi.org/10.2139/ssrn.2615008
By Meb Faber