A Bound on the Financial Value of Information

Abstract --It will be shown that each bit of information at most doubles the resulting wealth in the general stock market setup. This information bound on the growth of wealth is actually' attained for certain probability distributions on the market investigated by Kelly. The bound will be shown to be a special case of the result that the increase in exponential growth of wealth achieved with true knowledge of the stock market distribution F over that achieved with incorrect knowledge G is bounded above by D( FllG), the entropy of F relative to G

Optimized Bacteria are Environmental Prediction Engines

Experimentalists have observed phenotypic variability in isogenic bacteria populations. We explore the hypothesis that in fluctuating environments this variability is tuned to maximize a bacterium's expected log growth rate, potentially aided by epigenetic markers that store information about past environments. We show that, in a complex, memoryful environment, the maximal expected log growth rate is linear in the instantaneous predictive information---the mutual information between a bacterium's epigenetic markers and future environmental states. Hence, under resource constraints, optimal epigenetic markers are causal states---the minimal sufficient statistics for prediction. This is the minimal amount of information about the past needed to predict the future as well as possible. We suggest new theoretical investigations into and new experiments on bacteria phenotypic bet-hedging in fluctuating complex environments.Comment: 7 pages, 1 figure; http://csc.ucdavis.edu/~cmg/compmech/pubs/obepe.ht

The Value of Information for Populations in Varying Environments

The notion of information pervades informal descriptions of biological systems, but formal treatments face the problem of defining a quantitative measure of information rooted in a concept of fitness, which is itself an elusive notion. Here, we present a model of population dynamics where this problem is amenable to a mathematical analysis. In the limit where any information about future environmental variations is common to the members of the population, our model is equivalent to known models of financial investment. In this case, the population can be interpreted as a portfolio of financial assets and previous analyses have shown that a key quantity of Shannon's communication theory, the mutual information, sets a fundamental limit on the value of information. We show that this bound can be violated when accounting for features that are irrelevant in finance but inherent to biological systems, such as the stochasticity present at the individual level. This leads us to generalize the measures of uncertainty and information usually encountered in information theory

The History of the Quantitative Methods in Finance Conference Series. 1992-2007

This report charts the history of the Quantitative Methods in Finance (QMF) conference from its beginning in 1993 to the 15th conference in 2007. It lists alphabetically the 1037 speakers who presented at all 15 conferences and the titles of their papers.