Rational Decisions, Random Matrices and Spin Glasses
AbstractWe consider the problem of rational decision making in the presence of nonlinear constraints. By using tools borrowed from spin glass and random matrix theory, we focus on the portfolio optimisation problem. We show that the number of ``optimal'' solutions is generically exponentially large: rationality is thus de facto of limited use. In addition, this problem is related to spin glasses with L\'evy-like (long-ranged) couplings, for which we show that the ground state is not exponentially degenerate.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number cond-mat/9801209.
Date of creation: Jan 1998
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- Stefano Galluccio & Jean-Philippe Bouchaud & Marc Potters, 1998. "Rational decisions, random matrices and spin glasses," Science & Finance (CFM) working paper archive 500054, Science & Finance, Capital Fund Management.
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
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