Evolutionary Models of Asset Markets

Igor Evstigneev (University of Manchester)
Monday, October 31, 2011 - 2:15pm
Spandauer Strasse 1, Room 22

The idea of this direction of work is to apply evolutionary dynamics (mutation and selection) to the analysis of the long-run performance of financial trading strategies. A stock market is understood as a heterogeneous population of frequently interacting investment strategies (portfolio rules) in competition for market capital. The aim of the work is to build a "Darwinian theory" of portfolio selection. For the purpose of this analysis, new dynamic equilibrium models are developed combining ideas of evolutionary game theory and stochastic dynamic games. The results obtained make it possible to identify investment strategies that possess properties of evolutionary stability guaranteeing survival in the market selection process.