Rational decisions, random matrices and spin glasses
We 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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|Date of creation:||Jan 1998|
|Publication status:||Published in Physica A 259,449 (1998)|
|Contact details of provider:|| Postal: 6 boulevard Haussmann, 75009 Paris, FRANCE|
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- Galluccio, Stefano & Bouchaud, Jean-Philippe & Potters, Marc, 1998. "Rational decisions, random matrices and spin glasses," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 259(3), pages 449-456.
- 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)
This paper has been announced in the following NEP Reports:
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- Antonio Doria, Francisco, 2011. "J.B. Rosser Jr. , Handbook of Research on Complexity, Edward Elgar, Cheltenham, UK--Northampton, MA, USA (2009) 436 + viii pp., index, ISBN 978 1 84542 089 5 (cased)," Journal of Economic Behavior & Organization, Elsevier, vol. 78(1-2), pages 196-204, April.
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- M. Andrecut, 2013. "Spin Glasses and Nonlinear Constraints in Portfolio Optimization," Papers 1311.2511, arXiv.org.
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