An evolutionary finance model with short selling and endogenous asset supply

Rabah Amir; Sergei Belkov; Igor V. Evstigneev; Thorsten Hens

doi:10.1007/s00199-020-01269-x

An evolutionary finance model with short selling and endogenous asset supply

Rabah Amir, Sergei Belkov, Igor V. Evstigneev, Thorsten Hens

Economics

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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.

Original language	English
Journal	Economic Theory
DOIs	https://doi.org/10.1007/s00199-020-01269-x
Publication status	Published - 7 May 2020

Keywords

Evolutionary finance
survival portfolio rules
market games
stochastic games

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10.1007/s00199-020-01269-x

A-B-E-H-12-04-20Accepted author manuscript, 319 KB

http://link.springer.com/10.1007/s00199-020-01269-x

Cite this

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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.",

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AU - Belkov, Sergei

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AU - Hens, Thorsten

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N2 - 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.

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KW - market games

KW - stochastic games

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An evolutionary finance model with short selling and endogenous asset supply

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Keywords

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