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Performance of investment strategies in the absence of correct beliefs

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  • Çisem Bektur

Abstract

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 borrowed from the theory of random dynamical systems. Copyright Springer-Verlag 2013

Suggested Citation

  • Çisem Bektur, 2013. "Performance of investment strategies in the absence of correct beliefs," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 36(1), pages 23-37, May.
    • Handle: RePEc:spr:decfin:v:36:y:2013:i:1:p:23-37
    DOI: 10.1007/s10203-012-0133-7
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    References listed on IDEAS

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    1. Amir, Rabah & Evstigneev, Igor V. & Hens, Thorsten & Schenk-Hoppe, Klaus Reiner, 2005. "Market selection and survival of investment strategies," Journal of Mathematical Economics, Elsevier, vol. 41(1-2), pages 105-122, February.
    2. Igor Evstigneev & Thorsten Hens & Klaus Schenk-Hoppé, 2006. "Evolutionary stable stock markets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 27(2), pages 449-468, January.
    3. Hens, Thorsten & Schenk-Hoppe, Klaus Reiner, 2005. "Evolutionary stability of portfolio rules in incomplete markets," Journal of Mathematical Economics, Elsevier, vol. 41(1-2), pages 43-66, February.
    4. Igor V. Evstigneev & Thorsten Hens & Klaus Reiner Schenk‐Hoppé, 2002. "Market Selection Of Financial Trading Strategies: Global Stability," Mathematical Finance, Wiley Blackwell, vol. 12(4), pages 329-339, October.
    5. Evstigneev, Igor V. & Hens, Thorsten & Schenk-Hoppé, Klaus Reiner, 2008. "Globally evolutionarily stable portfolio rules," Journal of Economic Theory, Elsevier, vol. 140(1), pages 197-228, May.
    6. Blume, Lawrence & Easley, David, 1992. "Evolution and market behavior," Journal of Economic Theory, Elsevier, vol. 58(1), pages 9-40, October.
    7. W. Bahsoun & I. Evstigneev & L. Xu, 2011. "Almost sure Nash equilibrium strategies in evolutionary models of asset markets," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 73(2), pages 235-250, April.
    8. Bhattacharya,Rabi & Majumdar,Mukul, 2007. "Random Dynamical Systems," Cambridge Books, Cambridge University Press, number 9780521825658, October.
    9. Bhattacharya,Rabi & Majumdar,Mukul, 2007. "Random Dynamical Systems," Cambridge Books, Cambridge University Press, number 9780521532723, October.
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    Cited by:

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    More about this item

    Keywords

    Evolutionary finance; Random dynamical systems; Kelly rule; C02; C73;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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