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 generally exponentially large, and each of them is fragile: rationality is in this case of limited use. In addition, this problem is related to spin glasses with Levy-like (long-ranged) couplings, for which we show that the ground state is not exponentially degenerate. (C) 1998 Published by Elsevier Science B.V. All rights reserved.