Rational decisions, random matrices and spin glasses

Stefano Galluccio, Jean-Philippe Bouchaud and Marc Potters ()
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Jean-Philippe Bouchaud: Science & Finance, Capital Fund Management

No 500054, Science & Finance (CFM) working paper archive from Science & Finance, Capital Fund Management

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 Lévy-like (long-ranged) couplings, for which we show that the ground state is not exponentially degenerate.

JEL-codes: G10 (search for similar items in EconPapers)
Date: 1998-01
New Economics Papers: this item is included in nep-fin
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Citations: View citations in EconPapers (31)

Published in Physica A 259,449 (1998)

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Journal Article: Rational decisions, random matrices and spin glasses (1998)
Working Paper: Rational Decisions, Random Matrices and Spin Glasses (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:sfi:sfiwpa:500054

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