Von Neumann-Gale Model, Market Frictions, and Capital Growth

Esmaeil Babaei; Igor V. Evstigneev; Klaus Reiner Schenk-hoppé; Mikhail Zhitlukhin

doi:10.1080/17442508.2020.1718152

Von Neumann-Gale Model, Market Frictions, and Capital Growth

Esmaeil Babaei, Igor V. Evstigneev, Klaus Reiner Schenk-hoppé, Mikhail Zhitlukhin

Economics

Research output: Contribution to journal › Article › peer-review

216 Downloads (Pure)

Abstract

The aim of this work is to extend the classical capital growth theory pertaining to frictionless nancial markets to models taking into account various kinds of frictions, including transaction costs and portfolio constraints. A natural generalization of the notion of a benchmark investment strategy (Platen, Heath and others) is proposed, and it is shown how such strategies can be used for the analysis of growth-optimal investments. The analysis is based on the classical von Neumann-Gale model of economic growth, a stochastic version of which is used in this study as a framework for the modeling of nancial markets with frictions. [The paper was received and accepted by the Editor on the same date: 15 Jan 2020.]

Original language	English
Journal	Stochastics
Early online date	31 Jan 2020
DOIs	https://doi.org/10.1080/17442508.2020.1718152
Publication status	Published - 2020

Keywords

Capital growth theory
transaction costs
random dynamical systems
convex multivalued operators
von Neumann-Gale dynamical systems
rapid paths

Access to Document

10.1080/17442508.2020.1718152

capital-growth-stochastics-12-01-2020Accepted author manuscript, 399 KB

Cite this

@article{5d75215bcb6743a39043df61b847f6ce,

title = "Von Neumann-Gale Model, Market Frictions, and Capital Growth",

abstract = "The aim of this work is to extend the classical capital growth theory pertaining to frictionless nancial markets to models taking into account various kinds of frictions, including transaction costs and portfolio constraints. A natural generalization of the notion of a benchmark investment strategy (Platen, Heath and others) is proposed, and it is shown how such strategies can be used for the analysis of growth-optimal investments. The analysis is based on the classical von Neumann-Gale model of economic growth, a stochastic version of which is used in this study as a framework for the modeling of nancial markets with frictions. [The paper was received and accepted by the Editor on the same date: 15 Jan 2020.]",

keywords = "Capital growth theory, transaction costs, random dynamical systems, convex multivalued operators, von Neumann-Gale dynamical systems, rapid paths",

author = "Esmaeil Babaei and Evstigneev, {Igor V.} and Schenk-hopp{\'e}, {Klaus Reiner} and Mikhail Zhitlukhin",

year = "2020",

doi = "10.1080/17442508.2020.1718152",

language = "English",

journal = "Stochastics",

issn = "1744-2508",

publisher = "Gordon and Breach Science Publishers",

}

TY - JOUR

T1 - Von Neumann-Gale Model, Market Frictions, and Capital Growth

AU - Babaei, Esmaeil

AU - Evstigneev, Igor V.

AU - Schenk-hoppé, Klaus Reiner

AU - Zhitlukhin, Mikhail

PY - 2020

Y1 - 2020

N2 - The aim of this work is to extend the classical capital growth theory pertaining to frictionless nancial markets to models taking into account various kinds of frictions, including transaction costs and portfolio constraints. A natural generalization of the notion of a benchmark investment strategy (Platen, Heath and others) is proposed, and it is shown how such strategies can be used for the analysis of growth-optimal investments. The analysis is based on the classical von Neumann-Gale model of economic growth, a stochastic version of which is used in this study as a framework for the modeling of nancial markets with frictions. [The paper was received and accepted by the Editor on the same date: 15 Jan 2020.]

AB - The aim of this work is to extend the classical capital growth theory pertaining to frictionless nancial markets to models taking into account various kinds of frictions, including transaction costs and portfolio constraints. A natural generalization of the notion of a benchmark investment strategy (Platen, Heath and others) is proposed, and it is shown how such strategies can be used for the analysis of growth-optimal investments. The analysis is based on the classical von Neumann-Gale model of economic growth, a stochastic version of which is used in this study as a framework for the modeling of nancial markets with frictions. [The paper was received and accepted by the Editor on the same date: 15 Jan 2020.]

KW - Capital growth theory

KW - transaction costs

KW - random dynamical systems

KW - convex multivalued operators

KW - von Neumann-Gale dynamical systems

KW - rapid paths

U2 - 10.1080/17442508.2020.1718152

DO - 10.1080/17442508.2020.1718152

M3 - Article

SN - 1744-2508

JO - Stochastics

JF - Stochastics

ER -

Von Neumann-Gale Model, Market Frictions, and Capital Growth

Abstract

Keywords

Access to Document

Fingerprint

Cite this