A Numerical Study on the Evolution of Portfolio Rules: Is CAPM Fit for Nasdaq?

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dc.creatorCaldarelli, G.
dc.creatorPiccioni, M.
dc.creatorSciubba, E.
dc.date2000-09-28
dc.date.accessioned2026-07-07T12:06:28Z
dc.date.available2026-07-07T12:06:28Z
dc.descriptionIn 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 for their portfolio decisions, 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 study the effect of heterogeneous savings behaviour on asymptotic wealth shares. We find that CAPM is particularly ``unfit'' for highly risky environments.
dc.description18 pages, 2 eps figures, presented at CEF2000 Barcelona, Spain
dc.identifierhttps://arxiv.org/abs/cond-mat/0009437
dc.identifierhttp://arxiv.org/abs/cond-mat/0009437
dc.identifier.urihttp://salesiana.dossiersoluciones.com/handle/123456789/208665
dc.subjectStatistical Mechanics
dc.subjectSoft Condensed Matter
dc.subjectGeneral Finance
dc.titleA Numerical Study on the Evolution of Portfolio Rules: Is CAPM Fit for Nasdaq?
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