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Title:

A continuous time approximation of an evolutionary stock market model

Document type:
Zeitschriftenaufsatz
Author(s):
Buchmann, B. and Weber, S.
Abstract:
We derive a continuous time approximation of the evolutionary market selection model of Blume & Easley (1992). Conditions on the payoff structure of the assets are identified that guarantee convergence. We show that the continuous time approximation equals the solution of an integral equation in a random environment. For constant asset returns, the integral equation reduces to an autonomous ordinary differential equation. We analyze its long-run asymptotic behavior using techniques related to Lyapunov functions, and compare our results to the benchmark of profit-maximizing investors.
Keywords:
Portfolio theory, evolutionary finance, continuous time Euler approximation, stochastic processes in random environments, Lyapunov function
Journal title:
Int. J. Theor. Appl. Finance.
Year:
2007
Journal volume:
10
Journal issue:
7
Pages contribution:
1229-1253
Reviewed:
ja
Language:
en
WWW:
http://www.worldscientific.com/doi/abs/10.1142/S0219024907004627?journalCode=ijtaf
Status:
Verlagsversion / published
Semester:
SS 07
Format:
Text
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