Von Neumann-Gale model, market frictions and capital growth

The aim of this work is to extend the classical capital growth theory pertaining to frictionless financial markets to models taking into account various kinds of frictions, including transaction costs and portfolio constraints. A natural generalization of the notion of a benchmark investment strateg...

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Bibliographic Details
Published in:Stochastics (Abingdon, Eng. : 2005) Eng. : 2005), 2021-02, Vol.93 (2), p.279-310
Main Authors: Babaei, Esmaeil, Evstigneev, Igor V., Schenk-Hoppé, Klaus Reiner, Zhitlukhin, Mikhail
Format: Article
Language:English
Subjects:
Capital growth theory
convex multivalued operators
Economic development
Economic models
Investment strategy
random dynamical systems
rapid paths
Securities markets
transaction costs
von Neumann-Gale dynamical systems
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Summary:The aim of this work is to extend the classical capital growth theory pertaining to frictionless financial markets to models taking into account various kinds of frictions, including transaction costs and portfolio constraints. A natural generalization of the notion of a benchmark investment strategy (Platen, Heath and others) is proposed, and it is shown how such strategies can be used for the analysis of growth-optimal investments. The analysis is based on the classical von Neumann-Gale model of economic growth, a stochastic version of which is used in this study as a framework for the modelling of financial markets with frictions.
ISSN:1744-2508
1744-2516
DOI:10.1080/17442508.2020.1718152