Steinbacher, Matjaz (2009): Acceptable Risk in a Portfolio Analysis.
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A social network has been used to simulate how agents of different levels of risk aversion under different circumstances behave in financial markets when deciding between risk-free and a risky asset. This is done by a discrete time version evolutionary game of risk-loving and risk-averse agents. The evolutionary process takes place on a social network through which investors acquire information they need to choose the strategy. A significant feature of the paper is that first-order stochastic dominance is a key determinant of the decision-making, while second-order stochastic dominance is not, with the level of omniscience and preferences of agents also having a significant role. Under most of the circumstances, pure risk-aversion turns out to be dominated strategy, while pure risk-taking “almost” dominant.
|Item Type:||MPRA Paper|
|Original Title:||Acceptable Risk in a Portfolio Analysis|
|Keywords:||social networks, portfolio analysis, stochastic finance, stochastic dominance|
|Subjects:||G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions
Z - Other Special Topics > Z1 - Cultural Economics ; Economic Sociology ; Economic Anthropology > Z13 - Economic Sociology ; Economic Anthropology ; Social and Economic Stratification
C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C73 - Stochastic and Dynamic Games ; Evolutionary Games ; Repeated Games
|Depositing User:||Matjaz Steinbacher|
|Date Deposited:||22. Feb 2009 02:27|
|Last Modified:||13. Feb 2013 05:49|
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