Rational Decisions, Random Matrices and Spin Glasses
Disordered Systems and Neural Networks
2015-06-25 v1 Statistical Finance
Abstract
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 L\'evy-like (long-ranged) couplings, for which we show that the ground state is not exponentially degenerate.
Cite
@article{arxiv.cond-mat/9801209,
title = {Rational Decisions, Random Matrices and Spin Glasses},
author = {Stefano Galluccio and Jean-Philippe Bouchaud and Marc Potters},
journal= {arXiv preprint arXiv:cond-mat/9801209},
year = {2015}
}