In this paper we test computationally the performance of CAPM in an evolutionary setting. In particular we study the stability of wealth distribution in a financial market where some traders invest as prescribed by CAPM and others behave according to different portfolio rules. Our study is motivated by recent analytical results that show that, whenever a logarithmic utility maximiser enters the market, traders who either "believe" in CAPM and use it as a rule of thumb, or are endowed with genuine mean-variance preferences, vanish in the long run. Our analysis provides further insights and extends these results. We simulate a sequence of trades in a financial market and: first, we address the issue of how long is the long run in different parametric settings; second, we characterise a portfolio rule that, with some probability, dominates on logarithmic utility maximisers.
|Titolo:||A Numerical Study On The Evolution Of Portfolio Rules|
|Data di pubblicazione:||2000|
|Appare nelle tipologie:||4.1 Contributo in Atti di convegno|