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 Lévy-like (long-ranged) couplings, for which we show that the ground state is not exponentially degenerate.
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Bibliographic InfoPaper provided by Science & Finance, Capital Fund Management in its series Science & Finance (CFM) working paper archive with number 500054.
Date of creation: Jan 1998
Date of revision:
Publication status: Published in Physica A 259,449 (1998)
Other versions of this item:
- Stefano Galluccio & Jean-Philippe Bouchaud & Marc Potters, 1998. "Rational Decisions, Random Matrices and Spin Glasses," Papers cond-mat/9801209, arXiv.org.
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
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