Bridge over ocean
17 June 2022 Financial Analysts Journal Volume 78, Issue 3

Evolutionary Finance for Multi-Asset Investors

  1. Thorsten Hens
  2. Michael Schnetzer
Traditional mean–variance optimization focuses on the optimal allocation, but evolutionary finance looks for the optimal strategy. This paper develops a multi-asset evolutionary finance model and finds that yield-based strategies are superior.
Read the Complete Article in the Financial Analysts Journal CFA Institute Member Content


Standard strategic asset allocation procedures usually neglect market interaction. However, returns are not generated in a vacuum but the result of the market’s price discovery mechanism. Evolutionary finance accounts for this and endogenizes asset prices.This paper develops a multi-asset evolutionary finance model. Requiring little more than dividend and interest rate data, it provides a valuable guide to this class of models. While traditional mean/variance optimization is concerned with finding the optimal allocation, evolutionary finance’s focus is on finding the optimal strategy. This paper shows that yield-based strategies outperform competing alternatives and are evolutionarily advantageous for multi-asset investors.

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