Risk Aversion Impact on Investment Strategy Performance: A Multi Agent-Based Analysis

Olivier Brandouy (), Philippe Mathieu () and Iryna Veryzhenko ()
Additional contact information
Olivier Brandouy: Sorbonne Graduate School of Business
Philippe Mathieu: Université Lille 1
Iryna Veryzhenko: Sorbonne Graduate School of Business

Chapter Chapter 8 in Managing Market Complexity, 2012, pp 91-102 from Springer

Abstract: Abstract In order to supply an additional evidence on the effect of individual investors preferences on their portfolio dynamics from the wealth and risk adjusted return point of view, we construct an agent-based multi-asset model. We populate the artificial market with heterogeneous mean-variance traders with quadratic utility function. We compare the relative performance of investment strategies differ on their risk preferences using ecological competitions, where populations of artificial investors co-evolve. Our findings show that the higher relative risk aversion helps the agents survive in a long-range time frame in the competitions for higher wealth or Sharpe ratio of constrained portfolios. However, when short-selling is allowed, the highest (as well as lowest) risk aversion does not guarantee the highest earnings. Risk lovers as well as absolute risk averse run quickly out of competitions. Only the traders with moderate level of risk aversion survive in the long run.

Keywords: Risk Aversion; Risk Preference; Sharpe Ratio; Short Selling; Trading Period (search for similar items in EconPapers)
Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (2)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:lnechp:978-3-642-31301-1_8

Ordering information: This item can be ordered from
http://www.springer.com/9783642313011

DOI: 10.1007/978-3-642-31301-1_8

Access Statistics for this chapter

More chapters in Lecture Notes in Economics and Mathematical Systems from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().