An Evolutionary Portfolio Theory

By January 23, 2021Thorsten Hens

Thorsten Hens

University of Zurich – Department of Banking and Finance; Norwegian School of Economics and Business Administration (NHH); Swiss Finance Institute

Klaus Reiner Schenk-Hoppé

University of Manchester – Department of Economics; Norwegian School of Economics (NHH) – Department of Finance

Abstract

The purpose of this paper is to suggest a new theory of portfolio selection which is based on evolutionary reasoning in simple repeated market situations. According to this new point of view the ultimate success of a portfolio strategy is measured by the wealth share the strategy is eventually able to conquer in an evolutionary process of market selection. We identify a simple portfolio strategy as being the unique evolutionary stable strategy.

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