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) are descriptive models for decision making that summarize several violations of the expected utility theory. This paper …
Persistent link: https://www.econbiz.de/10005858528
This paper shows that a stock market is evolutionary stable if andonly if stocks are evaluated by expected relative dividends. Any othermarket can be invaded by portfolio rules that will gain market wealthand hence change the valuation. In the model the valuation of assetsis given by the wealth...
Persistent link: https://www.econbiz.de/10005858757
The disposition effect is the observation that investors hold winning stocks too long and sell losing stocks too early. A standard explanation of the disposition effect refers to prospect theory and in particular to the asymmetric risk aversion according to which investors are risk averse when...
Persistent link: https://www.econbiz.de/10005858770
Tobin (1958) has argued that in the face of potential capital losses on bonds it is reasonable to hold cash as a means to transfer wealth over time. It is shown that this assertion cannot be sustained taking into account the evolution of wealth of cash holders versus non cash holders. Cash...
Persistent link: https://www.econbiz.de/10005859324
This paper presents an application of evolutionary portfolio theory to stocks listed in the Swiss Market Index (SMI). We study numerically the long-run outcome of the competition of rebalancing rules for market shares in a stock market with actual dividends taken from firms listed in the SMI....
Persistent link: https://www.econbiz.de/10005859332
In this paper we analyze the long-run dynamics of the market selection process among simple trading strategies in an incomplete asset market with endogenous prices. We identify a unique surviving financial trading strategy. Investors following this strategy asymptotically gather total market...
Persistent link: https://www.econbiz.de/10005859367
strategies taking account of available information about current and previous events. It is shown that an investor allocating …
Persistent link: https://www.econbiz.de/10005859376
This paper studies the evolution of wealth shares of portfolio rules in incomplete markets with short-lived assets. Prices are determined endogenously. The performance of a portfolio rule in the process of repeated reinvestment of wealth is determined by the wealth share eventually conquered in...
Persistent link: https://www.econbiz.de/10005859386
The paper rst shows that nancial market equilibria need not to exist if agents possesscumulative prospect theory preferences with piecewise-power value functions. This is due tothe boundary behavior of the cumulative prospect theory value function, which might causean innite short-selling...
Persistent link: https://www.econbiz.de/10009354077
In this paper we analyze the long-run dynamics of the market selection process among simple trading strategies in an incomplete asset market with endogenous prices. We identify a unique surviving financial trading strategy. Investors following this strategy asymptotically gather total market...
Persistent link: https://www.econbiz.de/10005760921