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Evolutionary Finance for Multi-Asset Investors

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  • Michael Schnetzer
  • Thorsten Hens

Abstract

Standard strategic asset allocation procedures usually neglect market interaction. However, returns are not generated in a vacuum but the result of the market’s price discovery mechanism. Evolutionary finance accounts for this and endogenizes asset prices.This paper develops a multi-asset evolutionary finance model. Requiring little more than dividend and interest rate data, it provides a valuable guide to this class of models. While traditional mean/variance optimization is concerned with finding the optimal allocation, evolutionary finance’s focus is on finding the optimal strategy. This paper shows that yield-based strategies outperform competing alternatives and are evolutionarily advantageous for multi-asset investors.

Suggested Citation

  • Michael Schnetzer & Thorsten Hens, 2022. "Evolutionary Finance for Multi-Asset Investors," Financial Analysts Journal, Taylor & Francis Journals, vol. 78(3), pages 115-127, July.
    • Handle: RePEc:taf:ufajxx:v:78:y:2022:i:3:p:115-127
    DOI: 10.1080/0015198X.2022.2071581
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