The case for active management from the perspective of Complexity Theory
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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- J. Doyne Farmer & Andrew W. Lo, 1999. "Frontiers of Finance: Evolution and Efficient Markets," Working Papers 99-06-039, Santa Fe Institute.
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