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An application of evolutionary finance to firms listed in the Swiss Market Index


Hens, Thorsten; Schenk-Hoppé, Klaus Reiner; Stalder, Martin (2002). An application of evolutionary finance to firms listed in the Swiss Market Index. Swiss Journal of Economics and Statistics = Schweizerische Zeitschrift für Volkswirtschaft und Statistik, 138(4):465-487.

Abstract

This paper presents an application of evolutionary portfolio theory to stocks listed in the Swiss Market Index (SMI). We study numerically the long-run outcome of the competition of rebalancing rules for market shares in a stock market with actual dividends taken from firms listed in the SMI. Returns are endogenous because prices are determined by supply and demand stemming from the rebalancing rules. Our simulations show that in competition with rebalancing rules derived from Mean-Variance Optimization, Maximum Growth Theory and Behavioral Finance, the evolutionary portfolio rule discovered in Hens and Schenk-Hoppe (2001) will eventually hold total market wealth. According to this simple rule the portfolio weights should be proportional to the expected relative dividends of the assets.

Abstract

This paper presents an application of evolutionary portfolio theory to stocks listed in the Swiss Market Index (SMI). We study numerically the long-run outcome of the competition of rebalancing rules for market shares in a stock market with actual dividends taken from firms listed in the SMI. Returns are endogenous because prices are determined by supply and demand stemming from the rebalancing rules. Our simulations show that in competition with rebalancing rules derived from Mean-Variance Optimization, Maximum Growth Theory and Behavioral Finance, the evolutionary portfolio rule discovered in Hens and Schenk-Hoppe (2001) will eventually hold total market wealth. According to this simple rule the portfolio weights should be proportional to the expected relative dividends of the assets.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Language:English
Date:2002
Deposited On:24 Nov 2020 15:31
Last Modified:25 Nov 2020 11:23
Publisher:Peter Lang
ISSN:0303-9692
OA Status:Closed
Free access at:Publisher DOI. An embargo period may apply.
Related URLs:https://papers.ssrn.com/sol3/papers.cfm?abstract_id=344220 (Organisation)
Other Identification Number:merlin-id:19951

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