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Economic Theory
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Evolutionary Stable Stock Markets

Evolutionary stable stock markets
Authors: Evstigneev, Igor V; Hens, Thorsten; Schenk-Hoppé, Klaus Reiner;

Evolutionary Stable Stock Markets

Abstract

This paper shows that a stock market is evolutionary stable if andnonly if stocks are evaluated by expected relative dividends. Any othernmarket can be invaded by portfolio rules that will gain market wealthnand hence change the valuation. In the model the valuation of assetsnis given by the wealth average of the portfolio rules in the market. Thenwealth dynamics is modelled as a random dynamical system. Necessary and sufficient conditions are derived for the evolutionary stabilitynof portfolio rules when (relative) dividend payoffs form a stationarynMarkov process. These local stability conditions lead to a unique evolutionary stable strategy according to which assets are evaluated bynexpected relative dividends.

Countries
United Kingdom, Switzerland, Denmark, United Kingdom
Keywords

Incomplete markets, 10003 Department of Finance, 2002 Economics and Econometrics, Imcomplete markets, evolutionary .nance,portfolio theory,incomplete markets, Finance etc., 330 Economics, Auctions, bargaining, bidding and selling, and other market models, Evolutionary finance, Portfolio theory, 10007 Department of Economics, IEW Institute for Empirical Research in Economics (former), evolutionary finance; portfolio theory; incomplete markets, Portfolio, jel: jel:D81, jel: jel:D52, jel: jel:G11

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    Top 10%
    influence
    This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
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    This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
95
Top 10%
Top 10%
Top 10%
Green
bronze