We study the co-evolution of asset prices and individual wealth in a financial market populated by an arbitrary number of heterogeneous, boundedly rational agents. Using wealth dynamics as a selection device we are able to characterize the long run market outcomes, i.e. asset returns and wealth...

This paper investigates the nature of the academic field of finance as it looks in the early 21st century. Using Kuhn’s structure of scientific revolutions as a framework, the paper examines the development of the field over the last 50 years with particular emphasis on intellectual...

We study an evolutionary market model with long-lived assets. We show that in the absence of correct beliefs, the strategy which is “closer” to the Kelly rule cannot be driven out of the market. This means that this strategy will either dominate or at least survive. Our techniques are...

The paper examines a game-theoretic model of a financial market in which asset prices are determined endogenously in terms of a short-run equilibrium. Investors use general, adaptive strategies (portfolio rules) depending on the exogenous states of the world and the observed history of the game....

In this paper, we use a series of simple examples to illustrate how wealth-driven selection works in a market for Arrow securities. Our analysis delivers both a good and a bad message. The good message is that, when traders invest constant fractions of their wealth in each asset and have equal...