Evolutionary Finance for Multi-Asset Investors. Issue 3 (3rd July 2022)

• Record Type: Journal Article
• Authors: Schnetzer, Michael; Hens, Thorsten
• Is Part Of: Financial analysts journal. Volume 78:Issue 3(2022)
• Page Start: 115
• Page End: 127
• Publication Date: 2022-07-03
• Subjects: evolutionary finance -- multi-asset -- portfolio choice -- strategic asset allocation; Investment analysis -- Periodicals; Investment analysis; HW_FM; Periodicals; Electronic journals; 332.6
• DOI: 10.1080/0015198X.2022.2071581
• Languages: English
• ISSNs: 0015-198X

Abstract

Abstract: Standard strategic asset allocation procedures usually neglect market interaction. However, returns are not generated in a vacuum but the result of the market's price discovery mechanism. Evolutionary finance accounts for this and endogenizes asset prices. This paper develops a multi-asset evolutionary finance model. Requiring little more than dividend and interest rate data, it provides a valuable guide to this class of models. While traditional mean/variance optimization is concerned with finding the optimal allocation, evolutionary finance's focus is on finding the optimal strategy. This paper shows that yield-based strategies outperform competing alternatives and are evolutionarily advantageous for multi-asset investors.