Evolutionary Behavioural Finance: A model with endogenous asset payoffs

The Institute of Economics will hold a Webinar meeting as part of its Seminar Series on Tuesday, June 6, 2023: Mohammad Javad Vanaei from University of Manchester will present the paper "Evolutionary Behavioural Finance: A model with endogenous asset payoffs".

Abstract:

This study contributes to a novel direction of research combining evolutionary and behavioural approaches to the modelling of financial markets—Evolutionary Behavioural Finance (EBF). The main objective is to create a modern alternative to traditional Walrasian equilibrium theory relying upon the hypothesis of full rationality of market players, who are assumed to maximize their individual utility functions. In the framework of EBF traders/investors are allowed to have a whole variety of patterns of strategic behaviour depending on their individual psychology, not necessarily reducible to utility maximization. Most of the models considered in this field suppose that asset payoffs are exogenous and depend only on the underlying stochastic process of states of the world. The present work develops an EBF model where the payoffs are endogenous: they might depend on the share of total market wealth invested in the asset.

The Webinar will be online at this link.