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Evolutionary Finance Models with Short Selling and Endogenous Asset Supply

31 Pages Posted: 28 Sep 2017  

Sergei Belkov

University of Manchester

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 (Zurich Center)

Date Written: August 27, 2017

Abstract

Evolutionary Finance focuses on questions of "survival and extinction" of investment strategies (portfolio rules) in the market selection process. It analyzes stochastic dynamics of financial markets in which asset prices are determined endogenously by a short-run equilibrium between supply and demand. Equilibrium is formed in each time period in the course of interaction of portfolio rules of competing market participants. A comprehensive theory of evolutionary dynamics of this kind has been developed for models in which short selling is not allowed and asset supply is exogenous. The present paper extends the theory to a class of models with short selling and endogenous asset supply.

Keywords: Evolutionary finance, Survival portfolio rules, Random dynamical systems

JEL Classification: C73, D52, G11

Suggested Citation

Belkov, Sergei and Evstigneev, Igor V. and Hens, Thorsten, Evolutionary Finance Models with Short Selling and Endogenous Asset Supply (August 27, 2017). Swiss Finance Institute Research Paper No. 17-26. Available at SSRN: https://ssrn.com/abstract=2886325

Sergei Belkov

University of Manchester ( email )

Manchester
United Kingdom

Igor 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 (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

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