A Continuous Time Approximation of an Evolutionary Stock Market Model
Copyright policy )A Continuous Time Approximation of an Evolutionary Stock Market Model
We derive a continuous time approximation of the evolutionary market selection model of Blume and Easley (1992). Conditions on the payoff structure of the assets are identified that guarantee convergence. We show that the continuous time approximation equals the solution of an integral equation in a random environment. For constant asset returns, the integral equation reduces to an autonomous ordinary differential equation. We analyze its long-run asymptotic behavior using techniques related to Lyapunov functions, and compare our results to the benchmark of profit-maximizing investors.
- Australian National University Australia
- Ludwig-Maximilians-Universität München Germany
- Cornell University United States
- University of Hannover Germany
- Technical University of Munich Germany
Other nonlinear integral equations, Portfolio theory, evolutionary finance, continuous time Euler approximation, stochastic processes in random environments, Lyapunov function, Economic growth models, Finance etc.
Other nonlinear integral equations, Portfolio theory, evolutionary finance, continuous time Euler approximation, stochastic processes in random environments, Lyapunov function, Economic growth models, Finance etc.
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