Future Directions — The Path Ahead for Evolutionary Finance

Let us begin our conclusion to this book by way of summary of what we have presented. In Chapters 2 and 3 we outlined the foundations of both “traditional” and “new” views on the mechanics underlying information and asset price dynamics in financial markets. Without doubt, our own purview of financial market information forming together in a manner consistent with biological/evolutionary principles falls firmly under the “new” view umbrella.1 Indeed, we directly incorporated some preexisting “new” view principles into our own model of information mechanics presented in Chapter 4. This, “Evolutionary Finance” perspective on markets began with the simple premise that investors interpret interdependent information using a process of encoding and categorization. This fundamentally all-too-human response toward informational structure can be readily described by a byte to meme, meme to theme, theme to overall market sentiment “information building” mechanism where the order of information arrival is deemed to be important. Still, in undertaking such behavior investors typically use heuristic rules of thumb (simple strategies) to assist with the encoding and categorization process. Unfortunately, as we have seen, such rules have a tendency to go wrong.