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Capital distribution and portfolio performance in the mean-field Atlas model

Author

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  • Benjamin Jourdain

    (CERMICS, INRIA Paris-Rocquencourt)

  • Julien Reygner

    (CERMICS, LPMA)

Abstract

We study a mean-field version of rank-based models of equity markets such as the Atlas model introduced by Fernholz in the framework of Stochastic Portfolio Theory. We obtain an asymptotic description of the market when the number of companies grows to infinity. Then, we discuss the long-term capital distribution. We recover the Pareto-like shape of capital distribution curves usually derived from empirical studies, and provide a new description of the phase transition phenomenon observed by Chatterjee and Pal. Finally, we address the performance of simple portfolio rules and highlight the influence of the volatility structure on the growth of portfolios.

Suggested Citation

  • Benjamin Jourdain & Julien Reygner, 2013. "Capital distribution and portfolio performance in the mean-field Atlas model," Papers 1312.5660, arXiv.org, revised Aug 2014.
    • Handle: RePEc:arx:papers:1312.5660
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    References listed on IDEAS

    as
    1. Shkolnikov, Mykhaylo, 2013. "Large volatility-stabilized markets," Stochastic Processes and their Applications, Elsevier, vol. 123(1), pages 212-228.
    2. Fernholz, E. Robert & Ichiba, Tomoyuki & Karatzas, Ioannis, 2013. "Two Brownian particles with rank-based characteristics and skew-elastic collisions," Stochastic Processes and their Applications, Elsevier, vol. 123(8), pages 2999-3026.
    3. Robert Fernholz & Tomoyuki Ichiba & Ioannis Karatzas, 2013. "A second-order stock market model," Annals of Finance, Springer, vol. 9(3), pages 439-454, August.
    4. Tomoyuki Ichiba & Vassilios Papathanakos & Adrian Banner & Ioannis Karatzas & Robert Fernholz, 2009. "Hybrid Atlas models," Papers 0909.0065, arXiv.org, revised Apr 2011.
    5. Robert Fernholz & Tomoyuki Ichiba & Ioannis Karatzas, 2013. "A second-order stock market model," Papers 1302.3870, arXiv.org.
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