This chapter gives an overview of current research in evolutionary finance. We mainly focus on the survival and stability properties of investment strategies associated with the Kelly rule. Our approach to the study of the wealth dynamics of investment strategies is inspired by Darwinian ideas...

Evolutionary finance studies the dynamic interaction of investment strategies in financial markets. This market interaction generates a stochastic wealth dynamics on a heterogenous population of traders through the fluctuation of asset prices and their random payoffs. Asset prices are...

This paper introduces and analyzes an evolutionary model of a financial market with a risk-free asset. Focus is on the study of local stability of the wealth dynamics through the application of recent results on the linearization and stability of random dynamical systems (Evstigneev, Pirogov and...

The paper examines a game-theoretic evolutionary model of an asset market with endogenous equilibrium asset prices. Assets pay dividends that are partially consumed and partially reinvested. The investors use general, adaptive strategies (portfolio rules), distributing their wealth between...

We explore how the demand for a risky asset can be decomposed into an investment effect and a hedging effect by all risk-averse investors. This question has been shown to be complex when considered outside of the mean-variance framework. We restrict dependence among returns on the risky assets...

This paper provides an axiomatic foundation of the measurement of diversification in a one-period portfolio theory under the assumption that the investor has complete information about the joint distribution of asset returns. Four categories of portfolio diversification measures can be...

Institutional investors in equities tend to follow well-defined investment strategies, often based on factors such as size, value, momentum, quality, dividend yield and other stock characteristics. This paper explores the impact of capital flows between investment strategies on the cross-section...

Standard strategic asset allocation procedures usually neglect market interaction. However, returns are not generated in a vacuum but are the result of the market's price discovery mechanism which is driven by investors' investment strategies. Evolutionary finance accounts for this and...

We examine the portfolio-choice puzzle posed by Canner, Mankiw, and Weil (1997). The idea is to test a conclusion reached by Elton and Gruber (2000), stating that a bonds/stocks ratio which decreases in relation to risk tolerance does not necessarily mean a contradiction of modern...

This paper provides an axiomatic foundation of the measurement of diversification in a one-period portfolio theory under the assumption that the investor has complete information about the joint distribution of asset returns. Four categories of portfolio diversification measures can be...