Behavioral Equilibrium and Evolutionary Dynamics in Asset Markets

The Institute of Economics will hold a webinar meeting as part of its Seminar Series on Tuesday, May 4, 2021: Valeriya Potapova from the University of Manchester will present the paper "Behavioral Equilibrium and Evolutionary Dynamics in Asset Markets".

Abstract:

This paper analyses a dynamic stochastic equilibrium model of an asset market based on behavioural and evolutionary principles. The core of the model is a non-traditional game-theoretic framework combining elements of stochastic dynamic games and evolutionary game theory. Its key characteristic feature is that it relies only on objectively observable market data and does not use hidden individual agents’ characteristics (such as their utilities and beliefs). A central goal of the study is to identify an investment strategy that allows an investor to survive in the market selection process, i.e., to keep with probability one a strictly positive, bounded away from zero share of market wealth over an infinite time horizon, irrespective of the strategies used by the other players. The main results show that under very general assumptions, such a strategy exists, is asymptotically unique and easily computable.

The full paper is available here.

All interested participants are welcome to join online at the following link. External participants need to contact the organisers via email to grant access to the seminar.