The evolution of portfolio rules and the capital asset pricing model

Sciubba, Emanuela (2006) The evolution of portfolio rules and the capital asset pricing model. Economic Theory 29 (1), pp. 123-150. ISSN 0938-2259.

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Official URL: https://doi.org/10.1007/s00199-005-0013-2

Abstract

The aim of this paper is to test the performance of capital asset pricing model (CAPM) in an evolutionary framework. We model an economy where a heterogeneous population of long-lived agents invest their wealth according to different portfolio rules, and prove that traders who either “believe” in CAPM and use it as a rule of thumb, or are endowed with genuine mean-variance preferences, under some very weak conditions, vanish in the long run.We show that a sufficient condition to drive CAPM or mean-variance traders’ wealth shares to zero is that an investor endowed with a logarithmic utility function enters the market.

Metadata

Item Type:	Article
School:	Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School
Depositing User:	Sarah Hall
Date Deposited:	27 Jul 2020 16:40
Last Modified:	02 Aug 2023 18:01
URI:	https://eprints.bbk.ac.uk/id/eprint/32692

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