BFS 2002 |
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Contributed Talk |
Klaus Reiner Schenk-Hoppé, Thorsten Hens
The paper considers the evolution of portfolio rules in markets with
stationary returns and endogenous prices. The ultimate success of a
portfolio rule is measured by the wealth share the rule is eventually able
to conquer in competition with other portfolio rules. We give necessary and
sufficient conditions for portfolio rules to be evolutionary stable. In the
case of i.i.d. returns we identify a simple portfolio rule to be the unique
evolutionary stable strategy. Moreover we demonstrate that mean-variance
optimization is not evolutionary stable while the CAPM-rule always imitates
the best portfolio rule and survives.
http://www.iew.unizh.ch/wp/iewwp074.pdf