Journal Article10.2139/SSRN.3619146
Evolution in Pecunia
Rabah Amir,Rabah Amir,Igor V. Evstigneev,Thorsten Hens,Thorsten Hens,Thorsten Hens,Valeriya Potapova,Klaus Reiner Schenk-Hoppé,Klaus Reiner Schenk-Hoppé +8 more
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TL;DR: In this article, the authors model evolution in pecunia in the realm of finance and propose a framework combining stochastic dynamics and evolutionary game theory to identify evolutionary stable investment strategies.
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Abstract: The paper models evolution in pecunia—in the realm of finance. Financial markets are explored as evolving biological systems. Investors pursuing diverse investment strategies compete for the market capital. Some `survive' and some `become extinct.' A central goal is to identify evolutionary stable, i.e. guaranteeing survival, investment strategies. The problem is studied in a framework combining stochastic dynamics and evolutionary game theory. The model proposed employs only objectively observable market data, in contrast with traditional settings relying upon unobservable investors characteristics (utilities and beliefs). The main result is a construction of an evolutionary stable strategy in the model at hand.
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