An Evolutionary Portfolio Theory

Working Paper No. 74

27 Pages Posted: 21 Jun 2001  

Thorsten Hens

University of Zurich - Department of Banking and Finance; Norwegian School of Economics and Business Administration (NHH); Swiss Finance Institute (Zurich Center); Swiss Finance Institute

Klaus Reiner Schenk-Hoppé

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

Date Written: May 2001

Abstract

The purpose of this paper is to suggest a new theory of portfolio selection which is based on evolutionary reasoning in simple repeated market situations. According to this new point of view the ultimate success of a portfolio strategy is measured by the wealth share the strategy is eventually able to conquer in an evolutionary process of market selection. We identify a simple portfolio strategy as being the unique evolutionary stable strategy.

Keywords: Portfolio theory, evolutionary finance, incomplete markets

JEL Classification: D52, D81, D83, G11

Suggested Citation

Hens, Thorsten and Schenk-Hoppé, Klaus Reiner, An Evolutionary Portfolio Theory (May 2001). Working Paper No. 74. Available at SSRN: https://ssrn.com/abstract=274581 or http://dx.doi.org/10.2139/ssrn.274581

Thorsten Hens (Contact Author)

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 (Zurich Center)

c/o University of Geneve
40, Bd du Pont-d'Arve
1211 Geneva, CH-6900
Switzerland

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Klaus Reiner Schenk-Hoppé

University of Manchester - Department of Economics ( email )

Arthur Lewis Building
Oxford Road
Manchester, M13 9PL
United Kingdom

Norwegian School of Economics (NHH) - Department of Finance ( email )

Helleveien 30
N-5045 Bergen
Norway

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