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Atlas models of equity markets

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  • Adrian D. Banner
  • Robert Fernholz
  • Ioannis Karatzas

Abstract

Atlas-type models are constant-parameter models of uncorrelated stocks for equity markets with a stable capital distribution, in which the growth rates and variances depend on rank. The simplest such model assigns the same, constant variance to all stocks; zero rate of growth to all stocks but the smallest; and positive growth rate to the smallest, the Atlas stock. In this paper we study the basic properties of this class of models, as well as the behavior of various portfolios in their midst. Of particular interest are portfolios that do not contain the Atlas stock.

Suggested Citation

  • Adrian D. Banner & Robert Fernholz & Ioannis Karatzas, 2006. "Atlas models of equity markets," Papers math/0602521, arXiv.org.
    • Handle: RePEc:arx:papers:math/0602521
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    References listed on IDEAS

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    1. Robert Fernholz & Ioannis Karatzas & Constantinos Kardaras, 2005. "Diversity and relative arbitrage in equity markets," Finance and Stochastics, Springer, vol. 9(1), pages 1-27, January.
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