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The case for active management from the perspective of Complexity Theory

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  • Alejandro Revéiz Herault

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  • Sebastian Rojas

    ()

Abstract

This paper approaches active management of baskets of currencies from the perspective of Complexity theory, where the market is analysed as a Complex Adaptive system. A basket of currencies is constructed using objective probabilities (propensities) and an artificial intelligence optimization technique that allows for implicit learning of correlations dynamics. Statistical tests of the diversification benefit are presented.

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File URL: http://www.banrep.gov.co/docum/ftp/borra495.pdf
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Bibliographic Info

Paper provided by Banco de la Republica de Colombia in its series Borradores de Economia with number 495.

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Handle: RePEc:bdr:borrec:495

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Related research

Keywords: Portfolio Management; Complexity Theory; Artificial Intelligence. Classification JEL: G11; G14; G32.;

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  1. J. Doyne Farmer & Andrew W. Lo, 1999. "Frontiers of Finance: Evolution and Efficient Markets," Working Papers 99-06-039, Santa Fe Institute.
  2. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
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Cited by:
  1. Alejandro Reveiz & Carlos Eduardo León, 2008. "Efficient Portfolio Optimization in the Wealth Creation and Maximum Drawdown Space," BORRADORES DE ECONOMIA 004732, BANCO DE LA REPÚBLICA.
  2. Alejandro Reveiz Herault, . "The Factor-Portfolios Approach to Asset Management using Genetic Algorithms," Borradores de Economia 511, Banco de la Republica de Colombia.

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