Market Selection and Survival of Investment Strategies

descriptionPublicationkeyboard_double_arrow_right Article , Research , Other literature type , Preprint , Report 01 Jan 2001Embargo end date: 29 Nov 2011 United Kingdom, Denmark, United Kingdom, Switzerland Publisher:Elsevier BVJournal:Journal of Mathematical Economics, volume 41, pages 105-122 (issn: 0304-4068,

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Authors: Amir, Rabah; Evstigneev, Igor V; Hens, Thorsten; Schenk–Hoppé, Klaus Reiner;

doi: 10.2139/ssrn.290912 , 10.1016/j.jmateco.2003.10.006 , 10.5167/uzh-51991 , 10.3929/ethz-a-004374210

handle: 20.500.11850/146632

Market Selection and Survival of Investment Strategies

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Abstract

The paper analyzes the process of market selection of investment strategies in an incomplete asset market. The pay offs of the assets depend on random factors described in terms of a discrete-time Markov process. Market participants make dynamic investment decisions based on their observations and time. We show that a trader distributing wealth across available assets according to the relative expected returns eventually accumulates the entire market wealth. The result obtains under the assumption that the trader's strategy is asymptotically distinct from the CAPM strategy (prescribing investment in the market portfolio). This assumption turns out to be essentially necessary for the conclusion.

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United Kingdom, Denmark, United Kingdom, Switzerland

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Keywords

Incomplete markets, info:eu-repo/classification/ddc/330, Economics, 10003 Department of Finance, evolutionary finance, portfolio theory, investment strategies, CAPM, market selection, incomplete markets, 2002 Economics and Econometrics, Finance etc., evolutionary finance; portfolio theory; CAPM; investment strategies; market selection; incomplete markets, Market selection, 330 Economics, Auctions, bargaining, bidding and selling, and other market models, Evolutionary finance, 2604 Applied Mathematics, Portfolio theory, 10007 Department of Economics, IEW Institute for Empirical Research in Economics (former), CAPM, evolutionary ﬁnance, portfolio theory, CAPM, investment strategies, market selection, incomplete markets, Investment strategies, jel: jel:D81, jel: jel:D52, jel: jel:D83, jel: jel:G11

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