Evolutionary finance: a model with endogenous asset payoffs

Evolutionary Finance (EF) explores financial markets as evolving biological systems. Investors pursuing diverse investment strategies compete for the market capital. Some “survive” and some “become extinct”. A central goal is to identify evolutionary stable (in one sense or another) investment strat...

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Bibliographic Details
Published inJournal of bioeconomics Vol. 25; no. 2; pp. 117 - 143
Main Authors Evstigneev, I. V., Hens, T., Vanaei, M. J.
Format Journal Article
LanguageEnglish
Published New York Springer US 01.08.2023
Springer Nature B.V
Subjects
Behavior
Behavioral economics
Behavioral Sciences
Biological evolution
Competition
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Environmental Economics
Evolution
Finance
Financing
Game theory
Hypotheses
Investment strategy
Investments
Law and Economics
Political Science
Securities markets
Stochastic processes
Stochasticity
Evolutionary finance
D53
Evolutionary stable strategies
Endogenous asset payoffs
E21
G11
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Summary:Evolutionary Finance (EF) explores financial markets as evolving biological systems. Investors pursuing diverse investment strategies compete for the market capital. Some “survive” and some “become extinct”. A central goal is to identify evolutionary stable (in one sense or another) investment strategies. The problem is analyzed in a framework combining stochastic dynamics and evolutionary game theory. Most of the models currently considered in EF assume that asset payoffs are exogenous and depend only on the underlying stochastic process of states of the world. The present work develops a model where the payoffs are endogenous: they depend on the share of total market wealth invested in the asset.
ISSN:1387-6996
1573-6989
DOI:10.1007/s10818-023-09335-9