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The nature of randomness: Part 1 – Knowable or unknowable?

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  • Michael R. Powers

Abstract

Purpose - In this two-part series, this paper seeks to consider certain intriguing aspects of randomness, the basic mathematical concept used to model financial risk and other unknown quantities in the physical world. Design/methodology/approach - Part 1 applies concepts from quantum physics and algorithmic information theory to distinguish between knowable complexity and unknowable complexity. Findings - In Part 1, it is found that Heisenberg's uncertainty principle can be used to provide concrete examples of random variables, and that the Kolmogorov/Chaitin notion of algorithmic complexity can be used to define the formal concept of randomness. Originality/value - The two-part series explores the underlying nature of randomness in terms of both its physical/mathematical properties and its role in human cognition.

Suggested Citation

  • Michael R. Powers, 2008. "The nature of randomness: Part 1 – Knowable or unknowable?," Journal of Risk Finance, Emerald Group Publishing, vol. 9(1), pages 5-8, January.
  • Handle: RePEc:eme:jrfpps:v:9:y:2008:i:1:p:5-8
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