Handbook of Financial Markets: Dynamics and Evolution

Chapter 9. Evolutionary Finance

1. Introduction 509
   1. Motivation and Background 509
   2. Applications and Real-World Implications 511
   3. Structure of Chapter 511
   4. Dynamics and Evolution 512
   5. Horse Races and the Kelly Rule 515
2. Evolutionary Models of Financial Markets 518
   1. Components of the Models 519
   2. Discussion of the Assumptions 521
   3. Outline of the Dynamics 523
3. An Evolutionary Model with Short-Lived Assets 524
   1. The Model 524
   2. Analysis of Local Dynamics 528
   3. An Example 530
   4. The Generalized Kelly Rule 532
   5. Global Dynamics with Adaptive Strategies 534
4. An Evolutionary Stock Market Model 537
   1. Local Dynamics 540
   2. Global Dynamics with Constant Strategies 543
   3. Kelly Rule in General Equilibrium 546
   4. Note: We thank the National Center of Competence in Research, “Financial Valuation ...