Dowling Bartholomew Frederick. Evolutionary Finance

Palgrave Macmillan, 2005. — 320 p. — ISBN13: 978-1-4039-9665-7, ISBN: 1-4039-9665-2.The purpose of this book is to introduce the field of bioinformatics to financial modeling. It focuses on the way information informs price, and constructs a framework to explain information generation and the agglomeration process, enabling the reader to make more effective financial decisions. Based on all aspects of applied finance, this book uses informational analysis to help the reader understand the similarities between biomathematics and financial mathematics.
This book introduces the field of bioinformatics to financial modeling. Why? Well, just as the human mind displays a voracious appetite when it comes to seeking out and assimilating new information, so do financial markets. Indeed, financial markets are huge information-consuming entities. What is the most obvious manifestation of their ruminations regarding this vast information flow? Asset prices. This book will aid both theoretician and practitioner by developing a comprehensive theory of how the actual building blocks of information fit together in a meaningful way to influence asset price dynamics. The net result is a better perspective on the texture and fabric of financial information — and better investment results as well.The “Old” View of Finance.
The efficient markets hypothesis: The traditional (albeit incomplete) standard-bearer for information assessment.
A little more on the link between the theory and the applied.
Cost, ability and speed: Important information determinants.
Do empirical studies of the EMH shed any light on the actual speed of information transferal?
Is “Strong EMH” all there is to the “Traditional” view of markets and information?
The “New” View of Finance.
“New” view challenge no. 1: Determinism, complexity theory and the nonlinear dynamics school.
“New” view challenge no. 2: Bounded rationality, heterogeneous agents and the Behavioral Finance school.
“New” view challenge no. 3: Trading rules, evolutionary games and artificial markets.
So where does Evolutionary Finance fit-in to the “new” view genre?
The Mechanics of Modeling Information as an Evolutionary Process.
Evolutionary information basics: Memetics and the contribution of Richard Dawkins.
Moving past the elementary: Taking the evolutionary information concept further into the field of finance.
The building blocks of our evolutionary approach toward information in finance.
Some consequences of our evolutionary approach toward modeling information.
How investors interpret Evolutionary Information.
Putting it Altogether – An Evolutionary Model of the Marketplace.
Stage I: Developing an intertemporal optimization model of information production/consumption and solving for general equilibrium conditions.
Stage II: Linking analyst research output to asset price dynamics.
Stage III: Highlighting our preferred evolutionary model of the market – constructing the informational genome of asset prices.
The Implications of Our Evolutionary Perspective for Distributional Form.
Foundations for an evolutionary approach toward distributional form.
Analyst/investor strategies and the ecology of the market.
Some implications of our results.
Evolutionary Finance – an Applied Perspective.
A primer on Evolutionary Algorithms.
Evolutionary asset selection.
Evolutionary Portfolio construction.
Does it work? the results of ten years of out-of-sample backtesting for the investment recommendations from Natural Selection.
Future Directions – The Path Ahead for Evolutionary Finance.
Future directions for Evolutionary Finance – the theory.
Future directions for Evolutionary Finance – the practice.