The use of genetic algorithm to find the eqiulibrium of the behavior of current investors in a bargaining game

Traditional models assign a limited role to trading volume, while in practice the annual volume in stock exchanges reaches 100% of issued shares and more. Also, while the benefits of diversification are emphasized through modern theories, most investors limit their portfolio to a number of stocks. Finally, it seems that the cross-sectional variation of expected return is not only due to the risk difference between the companies' stocks. The main goal of this research is to design and explain the strategic behavior model of investors using game theory and Nash equilibrium to analyze the mutual behavior of investors during the years 2009-2010. The statistical population of the research is all the companies admitted to the stock exchange, and 84 companies were selected as the research sample by systematic elimination method. The thesis consists of two parts: the bargaining game and the implementation of Markowitz's average variance model, which uses MATLAB software to implement the bargaining game and the genetic algorithm.