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# Statistical mechanics of asset markets with private information

## 1 Introduction

The fundamental hypothesis, which is typically adopted in financial economics, is that markets are efficient. This general hypothesis has been recently the object of a detailed, critical evaluation (see for instance ), nevertheless it remains an extremely useful benchmark. Many possible definitions of this hypothesis have been given. We shall adopt here the one suggested by Malkiel : A market is efficient with respect to an information set if the public revelation of that information would not change the prices of the securities. Loosely speaking, this means that the information is incorporated into, or reflected by, prices.

The efficiency hypotheses may also differ for the degree, or form of efficiency. The one we are going to consider here is strong efficiency: The information set includes the information available to any of the participants in the market, including private information.

In order to address the issue of efficiency, it is fundamental to understand how precisely information scattered across different agents is aggregated into the prices of the assets that are traded in the market. Two fundamental insights of economic theory go a long way towards addressing this question.

The first insight is that the asymmetric information of different traders may cause inefficiency of the equilibrium , given the strategic incentive of each agent not to reveal the information he has. The second insight is that in large markets the distortion produced by the private incentives and asymmetric information may vanish, because the benefit from the distortion, as well as the ability to distort, for any single agent may be infinitesimally small. This second insight makes the concept of market efficiency interesting and fruitful.

Here we address a specific aspect of the general question of efficiency of financial markets. How precisely does the size of the market affect efficiency? Or more precisely, how does the relative size of the market compared to the size of the uncertainty that agents are facing affect efficiency, when information available is private? The “size of the market” is an unambiguous concept, and is measured by the number of agents. The “size of the uncertainty” is less commonly used: It is defined here to be the number of possible states of nature affecting the return of the asset. We address this question in the context of a simple market, where the price of the asset is the outcome of market clearing between a total monetary demand and a fixed supply.

An alternative method, which has been frequently adopted in recent years, is the formulation of a precise, detailed description of the price formation process. For instance, the literature of market micro-structure analyzes the process of price formation in concrete markets, with a limited number of traders, and a well specified, usually sequential series of moves that ultimately determine the price of the asset. The emphasis is on the strategic aspects of information revelation through trade, and the role that institutional details of the market considered play in the process.

This method has provided useful insights in the working of concrete markets . But as always when one adopts very specific setups, the results depend in a critical way on the details of the extensive form game. Instead, we consider here a very simple market. There is only one asset, with a return that depends on the state of nature. Traders observe an imperfect signal of the realization of the state, and can then decide how much they invest in the asset, before the price of the asset is announced. The price of the asset is then determined to clear the market. Note that the agents must decide their investment before they know the price for the period, and the price is determined to equate the total demand equal to the total amount invested, to a fixed supply. So this model is very similar to the classic model of Shapley and Shubik .

If agents had a complete knowledge of the state, competitive prices would equal returns in any state. This means that prices would reflect all the information on the state of nature, i.e. that the market would be efficient. When agents have only partial information, competitive prices may fail to equal returns and the market may not be efficient. It will turn out that the fundamental element for the efficiency is the size of the market compared to the size of the uncertainty. Therefore we are going to introduce as crucial parameter the relative size of the market, that is the number of agents in the market divided by the number of the states of nature. Our first main result is that the competitive equilibrium of the market becomes efficient suddenly, once a threshold in relative number of agents and events is crossed.

The second question we analyze is the size of the difference between competitive and Nash equilibrium prices. This difference, and in particular its asymptotic behavior as the number of agents tends to infinity has already been studied, although in different setups. Particularly relevant from the point of view of our research are the results that deal with economies with private information. The typical result is that the difference between Nash and competitive equilibrium vanishes as the number of agents grows. The reason for this is clear: with a large number $`N`$ of agents the effect of the action of each agent on the aggregate outcome becomes negligible, and therefore the incentive to behave differently than an agent in a competitive economy vanishes. The interesting object of study therefore is the rate of convergence to zero of this difference. This rate depends on the specific game, and concrete examples yielding different rates have been found. Two examples may be considered here as an illustration. In the Gul and Postlewaite paper  the rate of convergence is $`\frac{1}{\sqrt{N}}`$. But in Rustichini, Satterthwaite and Williams  the rate is much faster, and is equal to $`\frac{1}{N}`$.

In our model an additional feature enters the analysis: the number of agents and the size of the uncertainty, modeled by the number of states of nature, are growing together. We are going to show that the relative difference of competitive versus Nash equilibrium prices may be non vanishing in the limits of large markets. Perhaps more surprisingly, the speed of convergence depends on the amount of information available, and in a discontinuous way.

Our results are based on tools and ideas of statistical mechanics of disordered systems . These same ideas have recently proven quite useful in the study of systems of heterogeneous interacting agents .

## 2 The model

The model is a simple market with one asset, and many traders. The return of the asset is determined in each period by the draw of a state of nature. Agents do not know the state, but observe an imperfect signal on it. After they observe the signal they have to decide the amount they invest in that period. The total amount invested, divided by the total supply of the asset, which is fixed, determines the market-clearing price. Each agent gets then the return of the asset for each unit he owns, and the market goes to the next period.

The return in each state, as well as the type of signal available to each agent, are determined once and for all before the initial period. And now we proceed to a more detailed exposition.

### Asset, returns, and agents

A single asset is being traded over an infinite number of periods in a market with a set $`I`$ of $`N`$ traders. There are $`N`$ units of asset available. The asset has a monetary return paid at the end of each period. This return is different in each period, depends on the state of nature for that period, $`\omega \mathrm{\Omega }`$, and is denoted by $`R^\omega `$. The state of nature is determined in each period, independently, according to the uniform distribution on $`\mathrm{\Omega }`$, which is assumed to be a finite set111We shall use $`\mathrm{\Omega }`$ also to denote the number of elements of $`\mathrm{\Omega }`$.. The value of the return $`R^\omega `$ for each state $`\omega `$ is drawn at random before the first period, and does not change afterwards. Returns thus only change because the state of nature changes.

Traders do not observe the state directly, but have a signal on the state according to some fixed private information structure, which is determined at the initial time and remains fixed. More precisely, a signal is a function from the state $`\omega \mathrm{\Omega }`$ to a signal space, which for simplicity we assume to be $`M\{,+\}`$. The signal observed by trader $`i`$ if state is $`\omega `$ is $`k_i^\omega `$. The information structure available to $`i`$ is the vector $`(k_i^\omega )_{\omega \mathrm{\Omega }}`$. This structure is determined, by setting $`k_i^\omega =+1`$ or $`1`$ with equal probability, independently across traders $`i`$ and states $`\omega `$.

How revealing the information provided by $`k_i`$ is depends, at each state $`\omega `$, on the entire realization of the vector, as well as on $`R^\omega `$. If, for example $`k_i^\omega =+`$ for all $`\omega `$ such that $`R^\omega >\overline{R}`$ (and $`k_i^\omega =`$ otherwise), then agent $`i`$ will know for sure when the return is higher than $`\overline{R}`$. In the random economy we consider, this is a very unlikely situation, because $`R^\omega `$ and $`k_i^\omega `$ are drawn independently. Still for agent $`i`$ the distribution of returns conditional on the signal he receives, will depend to some extent on the signal. Note that an agent who knew simultaneously the partial information of all agents would be able to know the state $`\omega `$, with probability one, for $`N\mathrm{}`$. Indeed the probability that there are two states $`\omega `$ and $`\omega ^{}`$ with different returns and that no agent can distinguish them is well approximated by $`\mathrm{\Omega }(\mathrm{\Omega }1)2^{(N+1)}`$, which vanishes for $`N\mathrm{}`$, even if $`\mathrm{\Omega }`$ grows proportionally to $`N`$ as we shall assume later.

So if the information available to each single agent happened to be revealed to all, then prices would be equal to return, for all states but a subset of states with measure tending to zero. This is what the strong efficiency hypothesis would require in our model.

### The market

At the beginning of each period each trader decides to “invest” a monetary amount $`z_i^m`$ in the asset, depending on the signal $`m=k_i^\omega `$ which agent $`i`$ receives at that time. The total amount invested by all the agents is the demand of the asset, and the supply is fixed to $`N`$. The market clearing condition determines the price $`p^\omega `$ for the period, according to:

$$\underset{iI}{}\underset{mM}{}z_i^m\delta _{k_i^\omega ,m}=p^\omega N$$
(1)
where $`\delta _{i,j}`$ is the Kronecker delta. When agents decide their investment $`z_i^m`$, they do not know the price at which they will buy the asset. Note that the price depends on the state since the amount invested by each agent depends on the state . At the end of the period, each unit of asset pays a monetary amount $`R^\omega `$. If agent $`i`$ has invested $`z_i^m`$ units of money, he will hold $`z_i^m/p^\omega `$ units of asset, so his payoff will be $`z_i^m(\frac{R^\omega }{p^\omega }1)`$.

The expected payoff of agent $`i`$ is described by a function $`u_i`$ of the entire vector of investments, as follows:

$$u_i(z_i,z_i)=\frac{1}{\mathrm{\Omega }}\underset{\omega \mathrm{\Omega }}{}\underset{mM}{}\delta _{k_i^\omega ,m}z_i^m\left(\frac{R^\omega }{p^\omega }1\right)=\underset{mM}{}\overline{\delta _{k_i,m}z_i^m\left(\frac{R}{p}1\right)},$$
(2)
where for any real valued function $`f`$ defined on $`\mathrm{\Omega }`$,

$$\overline{f}\frac{1}{\mathrm{\Omega }}\underset{\omega \mathrm{\Omega }}{}f^\omega $$

and $`z_i`$ denotes the strategy vector of all players but $`i`$. The goal of each agent $`i`$ is to maximize the expected value of $`u_i`$.

Agents can, if they want, invest an infinite amount in a period. For simplicity we exclude the possibility that they can sell an infinite amount, since this would complicate the market clearing condition if we insist that the price of the asset has to be positive. The results of this paper hold if we first require that investment are less than a maximum amount, and then take the limit in which this bound tends to infinity.

### Large markets

We shall be interested in the behavior of the market in the limit when $`N\mathrm{}`$. For the limit to be non-trivial limit, we need to discuss how different parameters of the model behave in the limit222We write as usual $`x_n=O(y_n)`$ for two sequences $`\{x_n\}`$ and $`\{y_n\}`$ if for two positive constants $`c`$ and $`C`$, $`c\frac{x_n}{y_n}C`$ for all $`n`$ sufficiently large. Also we write $``$ for relations which hold almost surely as $`N\mathrm{}`$..

If returns are on average larger than prices, agents will tend to invest more. This in turn drives prices up towards returns. We then expect that average price $`\overline{p}`$ will converge to the average return $`\overline{R}`$ and that the fluctuations of prices with $`\omega `$ will adjust to those of $`R^\omega `$. The information structure however constrains the fluctuations of prices. A simple argument shows that price fluctuations are small: Note that one can write

$$z_i^m=\frac{z_i^++z_i^{}}{2}+m\frac{z_i^+z_i^{}}{2}$$

for $`m=\pm 1`$. Then for $`\mathrm{\Omega }`$ large, $`\overline{k_i}0`$ and $`\overline{k_ik_j}\delta _{i,j}`$ and one easily finds that

$$\overline{p}\frac{1}{N}\underset{iI}{}\frac{z_i^++z_i^{}}{2}$$

and

$$\overline{(p\overline{p})^2}\frac{1}{N^2}\underset{iI}{}(\frac{z_i^{}z_i^{}}{2})^2\frac{1}{N}.$$
(3)
A non-trivial behavior is then expected when returns have fluctuations of a comparable size. Therefore we assume that returns have the specific form:

$$R^\omega =\overline{R}+\frac{\stackrel{~}{R}^\omega }{\sqrt{N}}$$
(4)
where $`\overline{R}>0`$ and $`\stackrel{~}{R}^\omega `$ is drawn from a Gaussian distribution with zero mean and variance $`\sigma ^2`$.

In particular we are interested in the transition to an efficient market, where information about returns is incorporated into prices, i.e. $`p^\omega =R^\omega `$. This is a set of $`\mathrm{\Omega }`$ equations in $`2N`$ unknown $`z_i^m`$. In order to allow for the possibility of observing the transition from an inefficient to an efficient market, we need to take a number of states $`\mathrm{\Omega }`$ which is proportional to $`N`$. Hence we define $`\alpha =\mathrm{\Omega }/N`$.

The key quantity we shall be interested in is the distance between vectors in $`R^\mathrm{\Omega }`$, such as prices and returns, which is defined as usual

$$|xy|=\sqrt{\underset{\omega \mathrm{\Omega }}{}(x^\omega y^\omega )^2},$$

for all $`x,yR^\mathrm{\Omega }`$.

Finally note that the parameter $`\overline{R}`$ can be set to $`1`$, without loss of generality, by a suitable choice of the units of $`z_i^m`$. A value $`R1`$ can be reintroduced at any stage of the calculation by means of dimensional analysis. This leaves us with only two control parameters $`\alpha `$ and $`\sigma `$ in the limit $`N\mathrm{}`$. Note now that, with our choices of parameters, the distance of returns from their average is finite: $`|R1|^2\alpha \sigma ^2`$.

Of course real markets have a finite, but large, number $`N`$ of agents and finite, but small, fluctuations of returns. As we shall see numerical simulations of finite, but large, economies are in perfect agreement with the results for $`N\mathrm{}`$.

### Competitive equilibrium and Nash equilibrium

We are going to consider two equilibrium concepts for our market, competitive equilibrium and Nash equilibrium. Both give a description of what each agent does as a function of the signal observed. In the competitive equilibrium, each agent ignores the effect he has on the price. In the Nash equilibrium traders take their effect on prices into account. Here are the more precise definitions.

A competitive equilibrium is a vector $`(z_i^m)_{iI,mM}`$ such that:

1. for every $`i`$ and $`m`$,

$$z_i^m\text{ arg}\underset{x0}{\mathrm{max}}x\overline{\delta _{k_i,m}\left(\frac{R}{p}1\right)}$$
2. market clears at $`p^\omega `$, i.e. Eq. (1) holds.

Note that if the expected net return $`\overline{\delta _{k_i,m}\left(\frac{R}{p}1\right)}`$ is positive then the trader invests an infinite amount when receiving signal $`m`$.

A Nash Equilibrium is a vector $`(z_i^m)_{iI,mM}`$ such that:

1. for every $`i`$ and $`m`$,

$$z_i^m\text{ arg}\underset{x0}{\mathrm{max}}x\underset{\omega \mathrm{\Omega }}{}\delta _{k_i\omega }(m)\left(\frac{R^\omega }{p_i^\omega +x/N}1\right)$$

where $`p_i^\omega =p^\omega _{mM}\delta _{k_i^\omega ,m}z_i^m/N`$ is the contribution of all other agents to the price.
2. market clears at $`p^\omega `$, i.e. Eq. (1) holds.

The difference between a competitive equilibrium and a Nash equilibrium usually vanishes as $`N\mathrm{}`$. It is easy to check this when agents have no information (for instance, when $`k_i^\omega =+1`$, $`iI,\omega \mathrm{\Omega }`$). In this case price cannot depend on $`\omega `$. The competitive equilibrium price, $`p_C`$ is equal to the expected return:

$$p_C=\overline{R}$$

while the Nash equilibrium prices are

$$p_N=\left(1\frac{1}{N}\right)\overline{R}$$

In this case the distance in $`R^\mathrm{\Omega }`$ between the two prices vanishes as $`1/\sqrt{N}`$, for $`N\mathrm{}`$. Note that the difference $`p_Cp_N1/N`$ is much smaller than fluctuations of returns, which vanish as $`1/\sqrt{N}`$. We are going to see that, for a random information structure $`k_i^\omega `$, the difference $`p_C^\omega p_N^\omega `$ is generally of order $`\frac{1}{\sqrt{N}}`$. In particular it is of the same order of the fluctuations in returns. We shall also see that the nature of the two states is quite different.

### Learning to trade

We also consider boundedly rational agents who repeatedly trade in the market. Each agent $`i`$ has a propensity to invest $`U_i^m(t)`$ for each of the signals $`mM`$. His investment $`z_i^m=\chi _i(U_i^m)`$ at time $`t`$ is an increasing function of $`U_i^m(t)`$ ($`\chi _i:RR^+`$) with $`\chi _i(x)0`$ if $`x\mathrm{}`$ and $`\chi _i(x)\mathrm{}`$ if $`x\mathrm{}`$. After each period agents update $`U_i^m(t)`$ according to the marginal success of the investment:

$$U_i^m(t+1)=U_i^m(t)+\mathrm{\Gamma }\frac{u_i^\omega }{z_i^m}$$
(5)
where $`u_i^\omega =_{mM}\delta _{k_i^\omega ,m}z_i^m\left(\frac{R^\omega }{p^\omega }1\right)`$ is the payoff received in state $`\omega `$ investing a quantity $`z_i^+`$ or $`z_i^{}`$ depending on $`k_i^\omega `$ . As we did with the distinction between competitive equilibrium and Nash equilibrium, we distinguish between naive (or price takers) and sophisticated agents. The first do not take into account their impact on the price and hence take the partial derivative in Eq. (5) at fixed $`p^\omega `$. The latter, instead, account for the fact that if $`z_i^mz_i^m+dz`$ also the price $`p^\omega `$ changes by an infinitesimal amount and this gives a contribution to the partial derivative in Eq. (5).

## 3 Results

The study of markets’ equilibria and of the asymptotic properties of the learning dynamics for $`N\mathrm{}`$, turns into the analysis of the minima of the Hamiltonian function

$$H_\eta =|Rp|^2+\eta \frac{\alpha }{N}\underset{iI}{}\frac{z_{i}^{+}{}_{}{}^{2}+z_{i}^{}{}_{}{}^{2}}{2}$$
(6)
with $`\eta =0`$ for competitive equilibria or naive agents, and $`\eta =1`$ for Nash equilibria or sophisticated agents. The first term of $`H_\eta `$ (i.e. $`H_0`$) is just the squared distance between prices and returns. The competitive equilibrium prices and the Nash equilibrium prices minimize the Hamiltonian. A detailed proof of this fact shall be presented elsewhere . Here we offer a brief description of the main steps leading to it. We also present evidence from numerical simulations to illustrate our conclusions. First we observe that, given that $`p^\omega R^\omega =O(1/\sqrt{N})`$ is small, one can linearize the equations in $`p^\omega `$ 333E.g. $`R^\omega /p^\omega 1(R^\omega p^\omega )/\overline{R}`$, where again $``$ means that we are neglecting terms which vanish at least as $`N^{1/2}`$ relative to the one retained.. Finding equilibria becomes then a linear optimization problem which can be cast into the minimization of $`H_\eta `$.

The learning dynamics can also be linearized, leading to

$$U_i^m(t+1)=U_i^m(t)+\mathrm{\Gamma }\delta _{k_i^\omega ,m}\left[(R^\omega p^\omega )\eta \frac{z_i^m}{N}\right].$$
(7)
Here $`\eta =0`$ describes price takers or naive agents whereas $`\eta =1`$ describes sophisticated agents. Indeed the term $`z_i^m/N`$ arises exactly from a derivative $`\frac{p^\omega }{z_i^m}`$ of price with respect to investment. The dynamics (7), in the limit $`\mathrm{\Gamma }0`$, turns into444The idea is to consider a time interval $`\mathrm{\Delta }t=d\tau /\mathrm{\Gamma }`$ where $`d\tau `$ is small but much larger than $`\mathrm{\Gamma }`$. Then $`U_i^m(t+\mathrm{\Delta }t)U_i^m(t)`$ can be estimated to linear order in $`d\tau `$ using the law of large numbers for $`\mathrm{\Delta }t\mathrm{}`$ as $`\mathrm{\Gamma }0`$. a deterministic dynamics in continuum time. $`H_\eta `$ is a Lyapunov function of this dynamics which implies that the asymptotic state is described by the minima of $`H_\eta `$.

$`H_\eta `$ is a non-negative definite quadratic form of the dynamical variables $`(z_i^m)_{iI,mM}`$. This means that there is a single minimum (which is either a single point or a connected set).

In order to study the properties of the minima of $`H_\eta `$, we resort to tools of statistical mechanics. $`H_\eta `$ depends on the particular realization of the of two random variables: the random information structure $`k_i^\omega `$ and of the returns $`R^\omega `$. In the language of statistical mechanics, these two random variables represent the disorder in our system. However, in the limit $`N\mathrm{}`$, the statistical behavior is independent of the specific realization of the disorder555This statement applies to some of the observables, which are called self-averaging. Typically the average value $`_iO_i/N`$ of a quantity $`O_i`$ defined for each agent $`i`$ is self-averaging (i.e. attain a.s. a fixed value) by virtue of the law of large numbers when $`N\mathrm{}`$. We refer to ref.  for further discussion.. Averages over the disorder are handled by the replica method of statistical mechanics , which is briefly discussed in the appendix. A similar analysis for a system of interacting heterogeneous adaptive agents has been carried out, with the same techniques, in Ref. . Below we discuss the results in the two cases of competitive or Nash equilibria as a function of the two parameters $`\alpha `$ and $`\sigma `$.

### Equilibria and the transition to efficient markets

In the competitive equilibrium agents minimize the distance between prices and returns. As the number of agents increases, i.e. as $`\alpha =\mathrm{\Omega }/N`$ decreases, agents are collectively more efficient in driving prices close to returns. Indeed the distance $`|Rp|`$ decreases as $`\alpha `$ decreases, as shown in Fig. 1. The distance vanishes at a critical point $`\alpha _c`$ which marks a second order phase transition, in the statistical mechanics approach. The value of $`\alpha _c`$ depends on the intensity $`\sigma `$ of fluctuations of returns, as shown in Fig. 2. The region $`\alpha <\alpha _c`$ is characterized by the condition $`H_0=0`$, which means $`p^\omega =R^\omega `$ for all $`\omega \mathrm{\Omega }`$. This means that the market efficiently aggregates the information dispersed across agents into the price. The efficient phase, where $`H_0=0`$, shrinks as $`\sigma `$ increases. This is reasonable because as the fluctuations in $`R^\omega `$ increase, it becomes harder and harder for the agents to incorporate them into prices.

In order to analyze how agents behave, as a function of $`\alpha `$ and $`\sigma `$, it is useful to introduce the quantity

$$q_1=\frac{1}{N}\underset{i=1}{\overset{N}{}}\left(\frac{z_i^+z_i^{}}{2}\right)^2.$$
(8)
This measures how differently agents behave upon receiving the two different signals, i.e. how much they use the signal they receive. This is plotted in figure 3 as a function of $`\alpha `$ for $`\sigma =1`$. First we observe that $`q_1`$ increases as $`\alpha _c`$ is approached both from above or below, and that it displays a cusp at $`\alpha _c`$. A second singularity appears at a larger value of $`\alpha `$ – called $`\alpha _+`$ – whose behavior as a function of $`\sigma `$ is also shown in Fig. 2. In the region $`[\alpha _c,\alpha _+)`$ agents invest a non-zero amount at most for one of the two signals they receive. Actually in this region there is also a fraction $`\varphi `$ of agents who do not invest ($`z_i^+=z_i^{}=0`$) at all. This fraction increases as $`\alpha _c`$ is approached from above, suggesting that it becomes harder and harder for agents to find profitable opportunities with $`R^\omega >p^\omega `$, as $`\alpha \alpha _c`$.

For $`\alpha >\alpha _+`$, instead, all agents make positive investments under both signals ($`z_i^+>0`$ and $`z_i^{}>0`$). This sudden change manifests itself in the singular behavior of $`q_1`$ at $`\alpha _+`$. It is remarkable that a mixed state, with some agents investing all the time and some others investing under one signal at most, is not possible. As $`\alpha `$ increases, for $`\alpha >\alpha _c`$, the information complexity increases and the market becomes more and more inefficient. Prices follow returns to some extent, in the sense that when $`R^\omega `$ is larger than the average $`\overline{R}`$, the price $`p^\omega `$ is also larger than $`\overline{p}`$. But the slope of a regression of $`p^\omega \overline{p}`$ versus $`R^\omega \overline{R}`$ is less than one and it vanishes as $`\alpha ^1`$ for $`\alpha \mathrm{}`$.

As the complexity of fluctuations of returns increases, increasing $`\alpha `$, the partial information of agents becomes less and less useful. Hence for $`\alpha \mathrm{}`$ one recovers the case without information, where $`p^\omega =\overline{R}`$, and $`H_0\alpha \sigma ^2`$ converges to the fluctuations of returns themselves.

From the agent’s point of view the equilibrium in the efficient phase ($`\alpha <\alpha _c`$) is not unique. This means that adaptive agents following the above learning dynamics will end up in a states $`\{z_i^m\}`$ which depends on the initial conditions $`\{U_i^m(t=0)\}`$ (prices, of course, do not depend on the initial condition, because $`p^\omega =R^\omega `$ for all $`\omega \mathrm{\Omega }`$). This feature is captured by the parameter

$$q_0=\frac{1}{N}\underset{i=1}{\overset{N}{}}\frac{z_i^+z_i^{}}{2}\frac{z_{}^{}{}_{i}{}^{+}z_{}^{}{}_{i}{}^{}}{2}$$
(9)
in the statistical mechanics approach, where $`z_i^m`$ and $`z_{}^{}{}_{i}{}^{m}`$ represent two different systems of agents, with different initial conditions. We find that $`q_0q_1`$, in general, for $`\alpha <\alpha _c`$. Fig. 3 reports the value of $`q_1`$ for symmetric initial conditions $`U_i^m(0)=0`$ for all $`iI`$ and $`mM`$. This matches the results of numerical simulations with those initial conditions but Fig. 3 also shows that asymmetric initial conditions ($`U_i^m(0)=10m`$ for all $`iI`$ and $`m=\pm 1`$) yield a different value of $`q_1`$ and hence a different equilibrium.

### Market impact and Nash equilibria

The fact that the market impact $`\frac{p^\omega }{z_i^m}`$ of each agent is of order $`1/N`$ might suggest that prices in the Nash equilibrium should be close to those in the competitive equilibrium. More precisely one might expect that for every $`\omega `$, $`p_C^\omega p_N^\omega =O(1/N)`$ as in the case where agents have no information on the state of nature that we have discussed above. For large $`N`$ this is much smaller than the distance between prices and returns because $`p_C^\omega R^\omega =O(1/\sqrt{N})`$ in the competitive equilibrium. This suggests that Nash equilibria behaves similarly to competitive equilibria, and that the distinction vanishes as $`N\mathrm{}`$.

This conclusion however is not correct when agents have private information, as one can read from Eq. (6). Indeed, the term proportional to $`\eta `$ in Eq. (6), at the competitive equilibrium is of the same order in $`N`$ of the first term.

In fact

$$|p_Cp_N||p_CR||Rp_N|0$$

by the reverse triangle inequality ($`|p_CR||Rp_N|0`$ holds because $`p_C^\omega `$ is the feasible price closest to $`R^\omega `$). Fig. 1 shows that the right hand side is finite. This contrast with the case of no information where $`|p_cp_N|1/\sqrt{N}0`$ as $`N\mathrm{}`$. This case is only recovered in the limit $`\alpha \mathrm{}`$, in which $`|p_CR||Rp_N|0`$ (see Fig. 1).

The second term of Eq. (6) dramatically changes the statistical behavior of the market: i) the phase transition disappears: the distance between prices $`p_N^\omega `$ and returns $`R^\omega `$ smoothly decreases, as shown in figure 1, and it vanishes as $`\alpha 0`$. ii) the equilibrium is unique in both prices and investment for all $`\alpha >0`$. The asymptotic behavior of learning dynamics does not depend on initial conditions. iii) Agents always invest at least under one signal, for all $`\alpha >0`$. All agents who invest under both signals invest, on average over the two signals, the same quantity666This is easily seen from the equilibrium condition, which requires $`\overline{\delta _{k_i,m}(Rp)}\overline{\delta _{k_i,m}}\frac{z_i^m}{N}0`$ with the equality holding whenever $`z_i^m>0`$. Taking the sum on $`m`$, we find $`\overline{z_i^{k_i}}/N=\overline{(Rp)}`$ for all agents who invest under both signals. The same conditions imply that there cannot be an agent who never invests. Indeed if $`z_i^m=0`$, it must be that $`\overline{\delta _{k_i,m}(Rp)}0`$. The sum on $`m`$ gives $`\overline{(Rp)}0`$ which cannot be correct: agents will never spend more that they get at equilibrium.. iv) average price $`\overline{p}`$ is lower than average return $`\overline{R}`$, by a term of order $`1/N`$. As a consequence, the payoff of agents is not zero, as in competitive equilibria, but rather it is proportional to $`1/N`$.

Again as $`\alpha \mathrm{}`$ the fluctuations of prices with $`\omega `$ die out. This explains why, in that limit the price converges to the one without information. At the same time, as $`\alpha \mathrm{}`$ $`|p_NR||p_CR|0`$ and Nash prices converge to competitive prices (see Fig. 1).

### Learning rates and price volatility

Let us explore the dependence of the results discussed so far on the learning rate $`\mathrm{\Gamma }`$. In the limit $`\mathrm{\Gamma }0`$ the dynamics is deterministic and hence prices converge to equilibrium prices and the investment of agents also converges to a fixed point equilibrium. When $`\mathrm{\Gamma }>0`$ the dynamics becomes stochastic and fluctuations occur. These do not affect average prices $`p|\omega `$, which attain their $`\mathrm{\Gamma }0`$ value777The notation $`\mathrm{}`$ is intended here for long time averages in the stationary state of the dynamics. The symbol $`\mathrm{}|\omega `$ stands averages conditional on the state $`\omega `$.. On the contrary, price volatility increases, as shown in Fig. 4. For both Competitive and Nash equilibria we find that the distance of average prices to returns $`|Rp|`$ stays remarkably constant when $`\mathrm{\Gamma }`$ increases over two decades. On the contrary, price fluctuations $`\delta p^2_\omega (pp|\omega )^2|\omega /\mathrm{\Omega }`$ increase approximately linearly with $`\mathrm{\Gamma }`$ in the same range.

Hence excess volatility arises in these model markets when agents react too fast or strongly to price adjustments.

## 4 Conclusions

We have characterized the relative size of the market that gives at equilibrium market efficiency. The economy we have considered is very simple: there is only one asset. In addition, to simplify the analysis, we have considered the case of agents with unbounded wealth.

Our results generalize in a straightforward way to more general setups. This is true in particular for the economies with many assets. As long as agents have no budget constraint, they can invest independently in each asset separately. In other words agents do not introduce additional correlation in the prices of different assets beyond those already present in the returns.

## Appendix A Appendix: the statistical mechanics analysis

In order to study the minima of $`H_\eta `$, we introduce the partition function

$$Z(\beta )=_0^{\mathrm{}}𝑑z_1^+_0^{\mathrm{}}𝑑z_1^{}\mathrm{}_0^{\mathrm{}}𝑑z_N^+_0^{\mathrm{}}𝑑z_N^{}e^{\beta H_\eta \{z_i^m\}}.$$

The integrals, in the limit $`\beta \mathrm{}`$ are dominated by the configurations $`\{z_i^m\}`$ for which $`H_\eta `$ is minimal. The central quantity to compute is the free energy $`f_\beta =\beta ^1\mathrm{log}Z(\beta )`$. This has to be averaged over the realization of the disorder $`\{k_i^\omega ,R^\omega \}`$. One can reduce the problem of computing the average $`\mathrm{log}Z(\beta )`$ of the logarithm to that of computing averages of moments $`Z^n(\beta )`$ by the identity $`\mathrm{log}Z=lim_{n0}(Z^n1)/n`$. This is known as the replica trick  because, for integer $`n`$, $`Z^n(\beta )`$ is the partition function of $`n`$ non-interacting replicas $`\{z_{i,1}^m\},\mathrm{},\{z_{i,n}^m\}`$ of the system, with the same realization of disorder. Taking the average over the disorder introduces an effective interaction between replicas. The resulting expression is handled in such a way as to be able to use saddle point methods to compute it in the limit $`N,\beta \mathrm{}`$. An assumption on the symmetry of the minima with respect to permutation of replicas is necessary at this point. This symmetry can be broken in case of multiple minima, because different replicas may end-up in different minima. This is not our case because $`H_\eta `$ is a non-negative definite quadratic form. So the solution in our case is replica symmetric (see  for more details). A more detailed discussion of these steps in the context of a model of adaptive heterogeneous agents is given in Ref. .

The final result is that we can write

$$E_{k,R}\left[\underset{\{z_i^m\}}{\mathrm{min}}H_\eta \right]=\underset{\beta \mathrm{}}{lim}\underset{q_0,\widehat{q}_0,x,w,\widehat{R}}{\mathrm{min}}f_\beta (q_0,\widehat{q}_0,x,w,\widehat{R})$$
(10)
where

$`f_\beta (q_0,\widehat{q}_0,x,w,\widehat{R})`$ $`=`$ $`{\displaystyle \frac{1}{\beta }}\mathrm{ln}(1+x)+{\displaystyle \frac{q_0+\sigma ^2}{1+x}}+{\displaystyle \frac{x\widehat{q}_0}{\alpha }}{\displaystyle \frac{wq_0}{\alpha }}+{\displaystyle \frac{2\widehat{R}}{\alpha }}`$
$`{\displaystyle \frac{2}{\alpha \beta }}{\displaystyle _{\mathrm{}}^{\mathrm{}}}{\displaystyle \frac{dte^{t^2/2}}{\sqrt{2\pi }}}\mathrm{ln}{\displaystyle _{z0}}d^2ze^{\beta V_t(z)}`$
and, with $`z=(\overline{z}+\mathrm{\Delta },\overline{z}\mathrm{\Delta })`$

$$V_t(z)=\frac{w+\alpha \eta }{2}\mathrm{\Delta }^2\sqrt{\widehat{q}_0}t\mathrm{\Delta }+\frac{\alpha \eta }{2}\overline{z}^2\widehat{R}\overline{z}.$$
(11)
Here $`x=\beta (q_1q_0)`$ is a combination of the two order parameters whereas $`\widehat{q}_0,w`$ and $`\widehat{R}`$ arise as auxiliary variables (Lagrange multipliers).

The minimization problem contains the statistical information on the Gibbs probability distribution $`e^{\beta H_\eta }`$ over the space spanned by $`\{z_i^m\}`$, averaged over all realizations of disorder. We refer the reader to ref.  for a deeper discussion. Let it suffice to say that this probability distribution factorizes over agents, which is typical of systems with mean field interaction. Hence the probability that an agent invests fractions $`zA`$ where $`A`$ is any subset of $`R_+^2`$, is given by

$$\mathrm{Prob}\{zA\}=_A𝑑z_{\mathrm{}}^{\mathrm{}}\frac{dte^{t^2/2}}{\sqrt{2\pi }}\frac{e^{\beta V_t(z^+,z^{})}}{_{\zeta 0}d^2\zeta e^{\beta V_t(\zeta )}}$$
(12)
where the parameters of $`V_t`$ are those which satisfy the five first order conditions $`\frac{f_\beta }{q_0}=0`$, $`\frac{f_\beta }{\widehat{q}_0}=0`$, $`\frac{f_\beta }{x}=0`$, $`\frac{f_\beta }{w}=0`$ and $`\frac{f_\beta }{\widehat{R}}=0`$.

As $`\beta \mathrm{}`$, the integrals in Eq. (12) are dominated by the minimum $`z^{}`$ of $`V_t(z)`$ in $`R^2`$. The calculation leading to the final result are lengthy. We just report the final result.

### A.1 The case of $`\eta =0`$

When $`\eta =0`$ a degeneracy of solutions occurs for $`\alpha <\alpha _c`$. In other words, $`H_0`$ does not attain its minimum at a single isolated point, but rather on a connected set of points. Each point is the equilibrium of a market with some initial condition. As one varies the initial conditions, the equilibrium moves on the set.

The statistical mechanics approach takes an uniform average over all the points of this set. The results derived in this way, do not describe any particular market equilibrium, but rather a uniform distribution of equilibria resulting from some distribution of initial conditions. Since the mapping between initial conditions and equilibria is not known, it is not clear what exactly the statistical mechanics approach describes.

There is way out, in these kind of situations, which is to introduce a term in the functional to be minimized which breaks the degeneracy and selects one point in the set. In the limit when the strength of this term vanishes, one recovers the statistical properties of the original system in the selected equilibrium. The $`\eta `$ term is exactly of this form. Furthermore it is a perturbation which preserves the symmetries of the system ($`k_ik_i`$ for some $`i`$). With $`\eta =0^+`$ we then expect to find the properties of markets with symmetric initial conditions ($`U_i^+(0)=U_i^{}(0)`$).

The solution for $`\eta =0^+`$ takes a parametric form. Let us define the functions

$`\psi _r(\tau )`$ $`=`$ $`\sqrt{{\displaystyle \frac{2}{\pi }}}e^{\tau ^2/2}\tau \mathrm{erfc}(\tau /\sqrt{2})`$
$`\psi _q(\tau )`$ $`=`$ $`(1+\tau ^2)\mathrm{erfc}(\tau /\sqrt{2})\sqrt{{\displaystyle \frac{2}{\pi }}}\tau e^{\tau ^2/2}`$
$`\psi _x(\tau )`$ $`=`$ $`\mathrm{erfc}(\tau /\sqrt{2}).`$
For $`\tau [0,\tau _c]`$, where $`\tau _c`$ is the solution of $`\psi _q(\tau )+\sigma ^2\psi _r(\tau )=\psi _x(\tau )`$ we have

$`\alpha `$ $`=`$ $`\psi _q(\tau )+\sigma ^2\psi _r(\tau )`$
$`q_0`$ $`=`$ $`{\displaystyle \frac{\psi _q(\tau )}{\psi _r^2(\tau )}}`$
$`|Rp|`$ $`=`$ $`{\displaystyle \frac{\psi _q(\tau )+\sigma ^2\psi _r(\tau )\psi _x(\tau )}{\psi _r(\tau )}}`$
which holds in the interval $`\alpha [\alpha _c,1+\frac{2}{\pi }\sigma ^2]`$, where $`\alpha _c=\alpha (\tau _c)`$. Notice that $`H0`$ as $`\alpha \alpha _c`$.

For $`\alpha [(1+\frac{2}{\pi }\sigma ^2)^1,\alpha _c]`$ we find

$`\alpha `$ $`=`$ $`{\displaystyle \frac{\psi _x(\tau )}{\psi _q(\tau )+\sigma ^2\psi _r(\tau )}}`$
$`q_0`$ $`=`$ $`{\displaystyle \frac{\psi _q(\tau )}{\psi _r^2(\tau )}}`$
$`|Rp|`$ $`=`$ $`0`$
again for $`\tau [0,\tau _c]`$.

In these two regions, a fraction $`\varphi =\mathrm{erf}(\tau /\sqrt{2})`$ of agents never invests, whereas the others invest only under at most one signal. The fraction $`\varphi `$ is largest at the critical point $`\alpha _c`$, i.e. for $`\tau =\tau _c`$.

Outside this region we find an explicit solution: For $`\alpha 1+\frac{2}{\pi }\sigma ^2`$, we find $`q_0=1/\alpha `$ and $`|Rp|=(11/\alpha )\sqrt{1+\alpha \sigma ^2}`$. Hence the bare fluctuations of returns $`|R1|=\sqrt{\alpha \sigma ^2}`$ are recovered in this limit. In the region $`\alpha 1/(1+\frac{2}{\pi }\sigma ^2)`$ we find $`q_0=\alpha `$ and $`|Rp|=0`$. Agents invest under both signals and the distribution of their average investment $`(z^++z^{})/2`$ is exponential.

### A.2 The case of $`\eta =1`$

The study of the minimum of the potential $`V_t(z)`$ is quite different in this case. One has to distinguish two regions of integration of $`t`$, according to whether the minimum of $`V_t(z)`$ belongs to $`R_+^2`$ or not. The first case describes agents who invest under both signals, and our solution confirms that they all invest on average the same amount. The second case describes the fraction of agents who only invest once.

The solution again depends parametrically on $`\tau `$ and on a parameter $`y[1,2]`$ which satisfies the equation:

$`1{\displaystyle \frac{I_0(\tau )}{1+y}}`$ $`=`$ $`{\displaystyle \frac{(2y)(y1)}{y}}\{1{\displaystyle \frac{I_0(\tau )+[I_1(\tau )\tau ]\tau +2I_0(\tau )y}{(1+y)^2}}`$
$`+{\displaystyle \frac{\sigma ^2\left[\tau +(I_1(\tau )+\tau I_0(\tau )\tau )y\right]^2}{(1+y)^2}}\}`$
with $`I_0(\tau )=\mathrm{erfc}(\tau /\sqrt{2})`$ and $`I_1(\tau )=\sqrt{2/\pi }e^{\tau ^2/2}`$. We have

$`q_0`$ $`=`$ $`{\displaystyle \frac{(1+y)^2+\tau ^2(1+2y)I_0(\tau )\tau I_1(\tau )}{[\tau (1+y)y\tau I_0(\tau )+yI_1(\tau )]}}`$
$`\alpha `$ $`=`$ $`(q_0+\sigma ^2)\left\{{\displaystyle \frac{(y1)[\tau (1+y)y\tau I_0(\tau )+yI_1(\tau )]}{y(1+y)}}\right\}^2`$
$`|Rp|`$ $`=`$ $`(q_0+\sigma ^2)(y1)^2\left[{\displaystyle \frac{\tau }{y}}{\displaystyle \frac{\tau I_0(\tau )I_1(\tau )}{1+y}}\right]`$
This has two solutions $`y^\pm `$ for $`\tau >\tau _0`$, which describe the low and high $`\alpha `$ regions. There is no singularity or discontinuity in the solution when $`\tau \tau _0`$ (corresponding to $`\alpha 0.502\mathrm{}`$ for $`\sigma ^2=1`$). The fraction of agents playing only once is given by $`I_0(\tau )`$.


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# ALTERNATIVE SCENARIOS FOR THE FRAGMENTATION OF A GLUONIC LUND STRING

## 1 Introduction

The Lund model uses the decay of a massless relativistic string as a model for hadronization. Breaking of a string into a set of hadrons is thought of as a stochastic process with a constraint that the hadrons must be on the mass shell, a condition of saturation and an assumption of symmetry between the quark and the antiquark ends of the string. These assumptions lead $`^{\mathrm{?},\mathrm{?}}`$ to a unique solution for the probabilities involved in string breaking. The probability for a certain hadronic state to emerge by the fragmentation of a string turns out to be proportional to the hadronic phase space and the negative exponential of the area spanned by the string in space-time before it decays.

## 2 Gluonic strings

### 2.1 Directrix

The principle of least action applied to a string gives a minimal surface as the world surface of the string, described by a boundary curve called directrix. The assumption that the string doesn’t have any longitudinal degrees of freedom, and that the string tension has the same value in the rest frame of a local piece of string, lead to the conclusion that the directrix is a curve which has a light like tangent every where.

The directrix is determined in terms of the initial conditions on the string. Normally we are interested in a string state that was produced from a few quarks and gluons originating at a point or from a very small volume where perturbative effects dominate. So, we can think of the initial conditions on the string to be a few colour connected lumps of energy with different energy momentum vectors, which were created at the same point in space at some time. This initial condition leads to a very simple directrix : Partonic energy momenta arranged one after another in colour order.

### 2.2 Fragmentation as a process along the directrix

Since the string is completely described in terms of the directrix, it should be possible to describe all its properties, including how it fragments, as processes along the directrix. Without going into the details, let’s just note that the following algorithm implements fragmentation of a string as a process along the directrix and is completely equivalent, for gluonless strings, to the iterative process used for instance in JETSET.

Let’s define: $`x_n=_{i=1}^np_i`$, where $`p_i`$ is the momentum of the i’th rank particle, and an associated vector $`q_n`$ for the n’th breakup vertex. (for the gluonless case, this is just the vector position of the breakup point).

* Initialize $`q_0=k_q`$, and x=0.
* pick a random number z from the distribution $`f(z)=\frac{(1z)^a}{z}e^{\frac{bm^2}{z}}`$.
* starting from the tip of the vector $`(x_i+q_i)`$, which is a point on the directrix, find a segment k along the directrix, such that $`kq_i=\frac{m^2}{z}`$, and k is lightlike.
* find particle momentum p, and next q from : $`p_{i+1}=\frac{1}{2}l+\frac{1}{2}k`$, and $`q_{i+1}=q_i\frac{1}{2}l+\frac{1}{2}k`$ where, $`l=2z(q_i\frac{q_i^2}{2q_ik}k)`$
* update $`x_{i+1}=x_i+p_i`$, and the point on the directrix marked by x+q
* repeat all steps (except initialization!)

This algorithm implements area law in the following way.. The area of the quadilaterlal formed by $`q_i,k,q_{i+1}`$ and $`p`$, an area associated with production of one particle, is the same as the area of the flat triangular region between $`q_i`$ and $`q_{i+1}`$ (translated to the origin) plus a half the hadron mass. So the area between the curve traced by the particle momenta arranged in a chain and the directrix is equal to the area spanned by the string before it decays. Building up the area traced by the string in this way, was used in making analytical calculations in the Lund model$`^\mathrm{?}`$.

The above expressions for $`q_i`$, $`q_{i+1}`$ and p are completely symmetric with respect to forward and backward steps along the directrix. One can define $`\overline{z}`$ such that,

$`k=2\overline{z}(q_{i+1}\frac{q_{i+1}^2}{2q_{i+1}l}l)`$, and $`lq_{i+1}=\frac{m^2}{\overline{z}}`$.

The relation between z and $`\overline{z}`$ can be found from the above: $`\overline{z}=\frac{\frac{m^2}{z}}{q_1^2+\frac{m^2}{z}}`$, which inverts to, $`z=\frac{\frac{m^2}{\overline{z}}}{q_2^2+\frac{m^2}{\overline{z}}}`$.

The square of the vectors $`q_i`$ evolve as, $`q_{i+1}=(1z)(q^2+\frac{m^2}{z})`$

Eventually the vector $`x+q`$ will reach close to a gluon cornor, a place where the directrix changes direction. The remaining straight segment (which we will call ’c’), might be such that $`cq<\frac{m^2}{z}`$. It is then impossible to select a k that is a fraction of c and fullfills $`kq=\frac{m^2}{z}`$.

## 3 Fragmentation of a gluonic string

For a string with gluons, one can’t assume that any region of the string is equivalent to any other region except for scaling and Lorentz transformations. The energy momenta of the decay products are not simple linear combinations of two light like vectors. The assumptions mentioned at the beginning of this article, therefore, do not lead to any definite scheme for fragmentation of a gluonic string.

### 3.1 Method used in JETSET

To solve the problem the following additional inputs were made into the Monte Carlo program JETSET :

* The string state as determined by perturbation theory (e.g. the dipole cascade model), is considered to be frozen during the fragmentation process. That is, the process of hadronization doesn’t interfere with the structure of the string.
* z is to be reinterpreted as a connection between $`q_{i+1}^2`$ and $`q_i^2`$ through the relation $`q_{i+1}=(1z)(q_i^2+\frac{m^2}{z})`$, where $`q_i`$s are the vector positions of the fragmentation vertices, on the string surface.

This last relation and $`p^2=m^2=(\mathrm{\Delta }q)^2`$ always uniquely determine a point $`q_{i+1}`$ on the string surface. This means that the vertices obtained for the flat string by area law fragmentation, are projected on to the surface of the multigluon state. Unfortunately the area below the vertices is not preserved by this projection. That is, the probability for decay of the string into a cluster of hadrons is no longer proportional to the area spanned by the string before it decays.

### 3.2 Alternatives: Modifying the directrix

We start by recalling that a string state is a record of the quarks and gluons present in a hadronization environment. In particular, we note that large flat areas on the string surface correspond to large squared mass between two partons, and small areas correspond to low mass between two partons. At the point where our process along the directrix stopped, we were left with a mass $`cq_i`$ which was of the order of a hadron mass. It was impossible to find a k that was along the directrix, was light-like, and had the required product with q, because the available lightlike segment of the directrix was too short.

But the directrix is not calculated to infinite precision. Parton shower in the dipole cascade model for instance, is continued down to a certain scale in gluonic transverse momentum. The smaller this scale, the more gluons we would have. And at about the energy scale of hadron masses, a new physical phenomenon takes place: hadrons form. So, the detailed structure of the string resolved to the hadronization scale, might perhaps be affected by the process by which hadrons form.

In the following, this idea that the dipole cascade model determines a string state approximately, and the small scale details are fixed dynamically by the process of hadronization, has been used to break the deadlock in the fragmentation algorithm at gluon cornors. We think of the segments k in each step of the fragmentation process outlined earlier, as the segments of the real directrix.

As long as these can be chosen along the perturbatively calculated directrix, there is no problem. This can’t be done when the directrix changes direction, as mentioned earlier. Since k can not be chosen as a fraction of c, we take c and another segment of the directrix, K (not necessarily lightlike), and express their sum as two different lightlike vectors. That is, we write, $`c+K=k+c^{}`$, such that k and c’ are lightlike. We demand also that $`kq=\frac{m^2}{z}`$, so that we can make one more fragmentation step using this k.

These conditions do not determine the vectors k and c’ uniquely, since the length of the vector K is also unknown. By adding one more condition these vectors can be fixed. We tested several choices for this condition…

* eg2: Choose k as the unique light-like vector in the plane spanned by q and Q which is closer to Q than q.
* eg3: Choose k such that c and $`c^{}`$ have the same lengths in the rest frame of q

We note that for both these choices, it may happen that the modification of the directrix will contain sharp ”conrors”. Such situations will break the coherence conditions in a perturbative QCD cascade, in particular, the requirement of strong angular ordering.

* eg4: Same as eg3 except for the provision that 3-vector part of $`c^{}`$ would not be allowed have an angle in excess of 90 degrees with the next local part of the old directrix.

It is possible to introduce further ”smoothness conditions” to get rid of these problems but we have found that the following choice solves the problem everywhere.

* eg5: Chose $`c^{}`$ such that after the production of a particle using k, $`c^{}`$ can be used for the production of another particle, so that after two steps the vector x+q is back on the directrix. That is, the required additional condition is $`c^{}q^{}=\frac{m^2}{z^{}}`$, where $`q^{}`$ is the q vector obtained after the production step involving k.

We summarize in figures 2, the results of using these methods and compare them to a curve produced using JETSET in one simple situation: a perturbative string state consisting of a quark, an antiquark and a single gluon. We plot the rapidity distributions obtained from the different methods here. It is interesting to see that the fragmentation procedure produces too many particles over a large region (cf figure 2) although the modification of the directrix is actually only of the order of the hadron mass scale everywhere.

## 4 Conclusions

We reported at the meeting that the additional soft gluons which we introduced to effectuate area law fragmentation have to have an angular ordering property. We have since the time of the meeting learned many more things (to be discussed in a forthcoming paper). But our major finding is that any modification of the directrix must be such that the bremstahlung coherence conditions of perturbative QCD must be fulfilled even if the modifications are chosen to be small and local. The method indicated at the end of the talk could be chosen as a general strategy for these modifications.

## References


text:
# Toward Determination of 𝑚_𝑡 at 50 MeV AccuracyTalk given at the Linear Colliders Workshop 2000, Fermilab, USA, October 2000.

## 1 Introduction

In the last Linear Collider Workshop held in Sitges (LCWS ’99), significant theoretical developments were reported concerning the top quark physics in the threshold region: the next-to-next-to-leading order corrections to the $`e^+e^{}t\overline{t}`$ threshold cross section have been computed , and understanding of the renormalon cancellation mechanism in this cross section led to an improvement of convergence of the perturbative expansion . These developments enabled a precise determination of the $`\overline{\mathrm{MS}}`$ mass of the top quark, $`\overline{m}_tm_t^{\overline{\mathrm{MS}}}(m_t^{\overline{\mathrm{MS}}})`$, in the future experiment at an $`e^+e^{}`$ linear collider in the $`t\overline{t}`$ threshold region.

The top quark mass will be determined to high accuracy from the shape of the $`t\overline{t}`$ total production cross section in the threshold region . The location of a sharp rise of the cross section is determined mainly from the mass of the lowest-lying ($`1S`$) $`t\overline{t}`$ resonance. Since the mass of the resonance can be calculated as a function of the top quark mass and $`\alpha _s`$ from perturbative QCD, we will be able to extract the top quark mass from the measurement of the $`1S`$ peak position of the cross section.

In the last workshop, uncertainties in the determination of the top quark mass were also estimated. The statistical error in the measurement of the $`1S`$ peak position of the $`t\overline{t}`$ threshold cross section was estimated to be $``$50 MeV corresponding to a moderate integrated luminosity of 30 fb-1 , while the theoretical uncertainty in the relation between the peak position and the top quark mass was estimated to be 150–200 MeV .

The motivation of the present study is to reduce the theoretical uncertainty to the level of the experimental error (i.e. $`\text{ }<\text{ }50`$ MeV). We have computed an important piece of the higher-order corrections in order to achieve this goal. More precisely, Kiyo and the present author have computed in  the $`𝒪(\alpha _s^5m)`$ correction to the quarkonium $`1S`$ spectrum in the large-$`\beta _0`$ approximation.*** The same result was obtained later in .  We clarify the significance of the correction in the context of the measurement of the top quark mass.

## 2 Renormalon Cancellation in the Quarkonium Spectrum

The theoretical prediction of the quarkonium mass spectrum is given as a series expansion in $`\alpha _s`$. There seemed to be some confusions among theoreticians in identifying the order of accuracy of the theoretical prediction. These originated from the fact that the renormalon cancellation in the perturbation series of the quarkonium spectrum is realized in a slightly non-trivial way. When the pole mass and the binding energy are given as series expansions in $`\alpha _S`$, renormalon cancellation takes place between the terms whose orders in $`\alpha _S`$ differ by one :

(1)
Intuitively this may be seen by comparing the diagrams shown in Fig. 1.

One way to understand the shift in the order counting is to regard that an extra power of $`\alpha _S`$ in the binding energy is provided by the inverse of the Bohr radius $`r^1\alpha _Sm`$,

$`\text{i.e.}C_F{\displaystyle \frac{\alpha _S^n}{r}}\alpha _S^{n+1}m.`$ (2)
Another way to understand this is as follows. When the binding energy is expanded in $`\alpha _s`$,

$`E_{\mathrm{bin}}=2\overline{m}{\displaystyle \underset{n=2}{\overset{\mathrm{}}{}}}P_n(\mathrm{log}\alpha _s)\alpha _s^n,`$ (3)
the coefficients $`P_n(\mathrm{log}\alpha _s)`$ are polynomials of $`\mathrm{log}\alpha _s`$, which is a characteristic feature of the perturbative expansion of the boundstate spectrum. For large $`n`$, the polynomials behave as

$`P_n(\mathrm{log}\alpha _s)\alpha _s^1,`$ (4)
which effectively decrease the power of $`\alpha _s`$ by one.

It is legitimate to consider that the present perturbative calculation of the quarkonium spectrum, when expressed in terms of the quark $`\overline{\mathrm{MS}}`$-mass, has a genuine accuracy at $`𝒪(\alpha _S^3m)`$. In fact, in formal power countings, the last known term in the relation between the $`\overline{\mathrm{MS}}`$-mass and the pole-mass of a quark is $`𝒪(\alpha _S^3m)`$ , while the last known term of the binding energy (measured from twice of the quark pole-mass) is $`𝒪(\alpha _S^4m)`$. The former term includes in addition to a genuine $`𝒪(\alpha _S^3m)`$ part the leading renormalon contribution which does not become smaller than $`𝒪(\mathrm{\Lambda }_{\mathrm{QCD}})`$ . This renormalon contribution is cancelled  against the renormalon contribution  contained in the latter term. Therefore, after cancellation of the leading renormalons, the genuine $`𝒪(\alpha _S^3m)`$ part of the mass relation determines the accuracy of the present perturbation series relating the quark $`\overline{\mathrm{MS}}`$-mass and the quarkonium spectrum.

As stated, for the binding energy the calculation including the genuine $`𝒪(\alpha _S^4m)`$ corrections has already been completed. Also, the “large-$`\beta _0`$ approximation”  is known to be a pragmatically feasible and empirically successful estimation method of the leading renormalon contributions. Taking these into account, one finds that it is sufficient to calculate further the following two corrections in order to improve the accuracy of the spectrum by one order and to achieve a genuine accuracy at $`𝒪(\alpha _S^4m)`$: (I) the $`𝒪(\alpha _S^4m)`$ relation between the $`\overline{\mathrm{MS}}`$-mass and the pole-mass, and (II) the binding energy at $`𝒪(\alpha _S^5m)`$ in the large-$`\beta _0`$ approximation. This is because the leading renormalon contribution in the full $`𝒪(\alpha _S^5m)`$ correction to the binding energy will be incorporated by the large-$`\beta _0`$ approximation and the remaining part is expected to be irrelevant at $`𝒪(\alpha _S^4m)`$.

Of these two corrections we have calculated (II) analytically for the $`1S`$-state in . In the next section we will examine the series expansion of the “toponium” $`1S`$ spectrum. Also we will check validity of the above general argument explicitly at $`𝒪(\alpha _S^3m)`$ where we know the exact result.

## 3 “Toponium” $`1S`$ State Spectrum

Taking the input parameter as $`m_{t,\mathrm{pole}}=174.79`$ GeV/$`\overline{m}_t=165.00`$ GeV and setting $`\mu =\overline{m}_t`$ \[i.e. expansion parameter is $`\alpha _S(\overline{m}_t)=0.1092`$\], we obtain the series expansions of the mass spectrum of the toponium $`1S`$ state:

$`M_{1S}`$ $`=`$ $`2\times (174.790.460.390.280.19^{})\mathrm{GeV}\text{(Pole-mass scheme)}`$ (5)
$`=`$ $`2\times (165.00+7.21+1.24+0.22+0.052^{})\mathrm{GeV}\text{(}\overline{\mathrm{MS}}\text{-scheme)}.`$ (6)
The numbers with stars ($``$) are calculated in the large-$`\beta _0`$ approximation (in the case of $`\overline{\mathrm{MS}}`$-scheme the $`𝒪(\alpha _s^4m)`$ term of the pole-$`\overline{\mathrm{MS}}`$ mass relation is replaced by the large-$`\beta _0`$ approximation as well). The series expansion converges very slowly when the $`1S`$ spectrum is expressed using the pole mass. The series converges much faster when the spectrum is expressed by the $`\overline{\mathrm{MS}}`$ mass.

As we argued in the previous section, parametric accuracy of the last term in (6) is $`𝒪(\alpha _S^4m)`$ and we need to know further only the exact $`𝒪(\alpha _s^4m)`$ term of the pole-$`\overline{\mathrm{MS}}`$ mass relation to make a perturbative evaluation accurate up to this order (the exact form of the binding energy at $`𝒪(\alpha _s^5m)`$ is not necessary). In order to verify validity of this argument, we replace the binding energy at $`𝒪(\alpha _s^4m)`$ by its value in the large-$`\beta _0`$ approximation. Then the $`𝒪(\alpha _S^3m)`$ term of (6) changes to 0.23. Thus, we do not lose accuracy at this order by the replacement. On the other hand, if we replace in addition the $`𝒪(\alpha _s^3m)`$ term of the pole-$`\overline{\mathrm{MS}}`$ mass relation by its values in the large-$`\beta _0`$ approximation, the same term changes to 0.31. Thus, we lose the accuracy at $`𝒪(\alpha _S^3m)`$. These aspects are consistent with our general argument. Also, they suggest that the last term of (6) would be a reasonable estimate of the order of magnitude of the exact $`𝒪(\alpha _S^4m)`$ term. Then, when the $`𝒪(\alpha _s^4m)`$ term of the pole-$`\overline{\mathrm{MS}}`$ mass relation is calculated, the remaining theoretical uncertainty is expected to be below 50 MeV.

Finally let us examine the dependence of the $`1S`$ spectrum $`M_{1S}(\alpha _s(\mu ),\overline{m}_t)`$ on the scale $`\mu `$. As shown in Fig. 2 the scale dependence decreases as we include more terms of the series expansion. The scale dependence of the sum of the series up to $`𝒪(\alpha _s^4m)`$, where the last term is evaluated in the large-$`\beta _0`$ approximation, is also consistent with the estimate of the theoretical uncertainty below 50 MeV.

## 4 Discussions

There are corrections, other than the 4-loop pole-$`\overline{\mathrm{MS}}`$ mass relation, that should be computed before we achieve 50 MeV accuracy ultimately. These are:

1. The final-state interaction corrections (non-factorizable corrections) to the $`e^+e^{}t\overline{t}`$ total cross section.
2. The electroweak corrections to the cross section. These include the contributions from the tree-level non-resonant-type diagrams and the one-loop resonant-type corrections.

In addition, the uncertainty originating from the large next-to-next-to-leading order corrections to the normalization of the cross section affects the measurement of the top quark mass. This problem should be solved as well. An attempt has been given recently in .

## Acknowledgements

This work is based on the collaborations with Y. Kiyo and T. Nagano. The author was supported in part by the Japan-German Cooperative Science Promotion Program.


text:
# A fractal method for chaos in conservative closed systems of several dimensions

## 1 Introduction

In the last century the mathematical basis of deterministic chaos in compact phase space (closed) systems has become clear , and a number of methods have allowed the study of a vast class of particular cases. Important examples of these methods are the Melnikov method, the Poincaré section method, and the Lyapunov exponents method . Alas, the first and second methods are hard to be used in high dimensional systems and the Lyapunov exponents are coordinate dependent . Accordingly, the majority of the coordinate invariant results obtained so far refer to systems of $`1\frac{1}{2}`$ or two degrees of freedom.

Fractal methods, on the other hand, are coordinate independent and can be used in any dimension. These methods have been largely applied in the characterisation of the chaotic dynamics of dissipative systems, especially in the study of attractors and basin boundaries . Fractal techniques have also been employed to analyse scattering processes and chaotic transients in conservative systems with exits (open systems) .

The aim of this Letter is to propose an invariant method to detect, locate and quantify chaos in closed systems of several dimensions. More specifically, we are interested in bounded (recurrent) motions taking place in the absence of attractors and natural exits. The establishment of such a method is pertinent since the standard fractal methods cannot be applied to these cases. Roughly speaking, our method consists of the definition of adequate artificial exits in the original phase space, and the application of fractal type techniques to analyse the exit orbits. This fractal method for closed systems (FMCS) provides a graphic means to locate the chaotic and regular regions on phase space slices. It also leads to an algorithm to determine the chaotic and regular fractions of the phase space volume. Different from the above mentioned methods, the FMCS can be used to study classical as well as relativistic Hamiltonian systems of more than two degrees of freedom. In some sense the FMCS may be seen as a ‘higher-dimensional generalisation of the Poincaré section method’.

First in this Letter we establish a conjecture that will support the FMCS. In Section 3 we present the method divided in three parts: ($`i`$) to determine whether the system is chaotic or not; ($`ii`$) to locate the chaotic and regular regions on a two-dimensional surface of section; ($`iii`$) to compute the chaotic and regular fractions of the phase space volume. In Section 4 we consider the application of the FMCS to a couple of two standard maps. Finally, we present our conclusions in the last Section.

## 2 Chaos and fractals

One could say that a system is chaotic if it presents both sensitive dependence on initial conditions and mixing in a nonzero volume of the phase space. This definition, however, is not adequate since it depends on the time parametrization of the system. A time independent definition that solves this problem was given by Churchill : The system is chaotic if it is topologically transitive and the set of (points of) compact orbits is dense, in some positive volume of the phase space. In less technical terms, we define the system as chaotic if it presents, besides transitivity , a somewhere dense set of infinitely many unstable periodic orbits. Chaotic systems may exhibit not only chaotic but also nonchaotic (regular) regions. This concept of chaos is consistent with the general principle that chaos prevents integrability in the chaotic regions.

We shall consider each $`m`$-dimensional manifestly invariant part of the phase space (e.g., each energy surface) of autonomous closed systems, for which we define: (1) An exit $`E`$ is an $`m`$-dimensional region of the phase space, so that orbits are considered out of the system when they arrive at $`E`$. (2) The attraction basin $`B_E`$ is the closure of the set of initial conditions whose orbits reach $`E`$. (3) The invariant set $`I_E`$ is the set of interior points of $`B_E`$ whose orbits do not reach $`E`$.

The possible chaotic behaviour of the system is determined by the nature of its invariant sets. For a small exit defined in a chaotic region111 The exit has to be sufficiently small in order to avoid the complete outcome of the invariant set. , the Hausdorff dimension  of the invariant set is fractional and tends to the maximum value $`m`$ (the dimension of the ambient space) when the size of the exit is arbitrarily reduced. (In the case of nonhyperbolic dynamics, the maximum value $`m`$ can be obtained for exits of finite size .) On the other hand, invariant sets associated to exits defined in regular regions do not present any fractal structure, and their dimensions jump (discontinuously) avoiding fractional values when the exits are removed. We conjecture that this behaviour is typical for dynamical systems in general222 There are pathological examples of nonchaotic systems that exhibit fractal properties when exits are created (e.g., systems with degenerate resonances on a Cantor set ). It happens when the invariant set of the exit system is fractal but nonchaotic. This behaviour is, however, atypical. .

This conjecture states that chaos in closed systems and fractals in exit systems are both determined by unstable periodic orbits. Fractal invariant sets are typically chaotic in exit systems and chaos in closed systems is associated to the existence of fractal invariant sets. Therefore, the introduction and removal of exits leads from one situation to the other. Physically, an exit system with fractal invariant set evolves chaotically for a period of time before being scattered. When the exits are removed the system evolves chaotically forever. Further details about this conjecture can be found in Ref. .

## 3 Fractal method

The above conjecture can be used to obtain a method to study chaos in conservative closed systems of several dimensions ($`2\frac{1}{2}`$ or more degrees of freedom in the Hamiltonian case). In what follows we present one possible implementation of such a method, the FMCS.

In order to have an insight about where to look for chaos, we consider the volume of the phase space accessed by a sample of orbits. The idea is that in a chaotic region almost all orbits access approximately the same volume (the volume of that chaotic component). Regular orbits are expected to access lower dimensional surfaces that are arranged in families (of torus in Hamiltonian systems) with increasing area.

First we divide the phase space with a grid and then we evolve a sample of random initial conditions for a large period of time, counting the number of cells of the grid visited by each orbit. In a histogram of the number of visited cells, peaks suggest the possible existence of chaotic regions. We refer to these regions as chaotic candidates. With a search program, a subregion (a ball, for example) can be located inside each chaotic candidate. We define an exit in the subregion of the chaotic candidate that we want to study, and we compute (numerically) the dimension of the corresponding invariant set. Then we use our conjecture to conclude whether the region is chaotic or not. That is the first part of the FMCS.

Given an exit $`E`$ defined in a chaotic region, the chaotic region itself corresponds to the attraction basin of $`E`$. To locate the chaotic and regular regions on a two-dimensional surface $`S`$ (section) of the phase space, we define one exit in each chaotic component of the system. Then we take initial conditions on a grid in $`S`$ and we evolve these points until the rate of orbits arriving at the exits becomes negligible. The regular regions, corresponding to points whose orbits do not reach the exits, can be appropriately plotted in a two-dimensional graph. In this graph, the chaotic regions are represented by the blank area. That is the second part of the FMCS.

A straightforward extension of the preceding paragraph’s procedure allows us to compute the chaotic and regular fractions of the phase space volume. That is the third part of the FMCS, where the chaotic regions are identified from the evolution of points randomly chosen everywhere in the phase space. The chaotic fraction ($`c_f`$) is then given by the quotient between the number of initial points in the chaotic regions and the total number of initial conditions. Naturally, the regular fraction ($`r_f`$) is determined by the condition $`r_f+c_f=1`$.

Finally, consistency tests can be made in order to check the results and the hypotheses involved in the FMCS. The possibility that two or more disconnected chaotic components are associated to the same peak of the histogram, for instance, can be verified by comparing the fraction of the volume of each chaotic component with the fraction of points in the corresponding peak of the histogram. The volume of each chaotic region is limited by the corresponding fraction of visited cells. In addition, the stability of the results should be tested by taking different grid sizes, periods of evolution, exits, etc.

The last remark of this section concerns the computation of the Hausdorff dimension of invariant sets. A technique that demands a small computational effort consists of computing the uncertainty dimension  of the set of singularities of the escape time function defined on a smooth (one-dimensional) curve $`C`$: the escape time $`t=t(\lambda )`$ is the time required by the orbit of an initial point $`x(\lambda )`$ in $`C`$ to reach $`E`$, where $`\lambda `$ denotes the curve parameter; the singularities of $`t`$ correspond to points whose escape time is infinite (points of the invariant set). We measure the uncertainty dimension by applying a statistical method presented in . A parameter value $`\lambda _0`$ is called $`\epsilon `$-uncertain if $`t(\lambda _0+\epsilon )t(\lambda _0\epsilon )\mathrm{\Delta }`$, where $`\mathrm{\Delta }`$ is a positive number. We compute the fraction $`f(\epsilon )`$ of $`\epsilon `$-uncertain points for a large number of random values of the parameter $`\lambda `$, and for different values of $`\epsilon `$ going to zero. The asymptotic behaviour of this function is expected to be of the form $`f(\epsilon )\epsilon ^{(1d)}`$ for any $`\mathrm{\Delta }`$, where $`d`$ is the uncertainty dimension. The nonfractal case corresponds to $`d=0`$ and the fractal one to $`0<d1`$. In the fractal case, the Hausdorff dimension of the (total) invariant set is supposed to be typically equal to $`D=m1+d`$.

## 4 Example

The KAM surfaces cannot isolate the chaotic layers in nonintegrable Hamiltonian systems of three or more degrees of freedom : All the chaotic volume is joined together into a single global structure or, at most, into a finite number of disjoint components. In such components, chaotic orbits are expected to get arbitrarily close to any point energetically accessible. The hypotheses of our method are therefore satisfied for each value of the energy, and the FMCS is supposed to work in Hamiltonian systems of more than two degrees of freedom. We follow with an example of a Hamiltonian-like system that has an analytical expression for its discrete form.

Section maps can be explicitly obtained for periodically kicked rotors of $`2\frac{1}{2}`$ degrees of freedom. A simple example is given by the time dependent Hamiltonian

$$H=\frac{I_1^{\mathrm{\hspace{0.33em}2}}}{2m_1}+\frac{I_2^{\mathrm{\hspace{0.33em}2}}}{2m_2}+\frac{f(\theta _1,\theta _2)}{(2\pi )^2}\underset{n}{}\delta (tn\tau ),$$
(1)
where $`\tau /m_1=\tau /m_2=1`$ and $`f(\theta _1,\theta _2)=K\mathrm{cos}(2\pi \theta _1)\mathrm{cos}(4\pi \theta _2)`$, which is equivalent to an autonomous Hamiltonian of three degrees of freedom for a fixed value of the energy. Integrating the delta function at $`t=n\tau `$ we obtain a four-dimensional map on $`[0,1]\times [0,1]\times [0,1]\times [0,1]`$:

$$I_1^{(n+1)}=I_1^{(n)}+\frac{K}{2\pi }\mathrm{sin}(2\pi \theta _1^{(n)})\mathrm{cos}(4\pi \theta _2^{(n)})\text{mod}\mathrm{\hspace{0.33em}\hspace{0.33em}1},$$
(2)
$$I_2^{(n+1)}=I_2^{(n)}+\frac{K}{\pi }\mathrm{cos}(2\pi \theta _1^{(n)})\mathrm{sin}(4\pi \theta _2^{(n)})\text{mod}\mathrm{\hspace{0.33em}\hspace{0.33em}1},$$
(3)
$$\theta _1^{(n+1)}=\theta _1^{(n)}+I_1^{(n+1)}\text{mod}\mathrm{\hspace{0.33em}\hspace{0.33em}1},$$
(4)
$$\theta _2^{(n+1)}=\theta _2^{(n)}+I_2^{(n+1)}\text{mod}\mathrm{\hspace{0.33em}\hspace{0.33em}1}.$$
(5)
These expressions are coupled standard maps, and they also represent a perturbed twist mapping .

Let us consider system (2-5) for $`K=0.5`$. We divide the phase space with a square grid of $`16\times 16\times 16\times 16`$ ($`65536`$ cells). Then we compute the number $`N`$ of cells visited by the orbits of 150000 random initial points in 400000 iterations. The result is plotted in the histograms of Fig. 1. In Fig. 1a it can be seen that the histogram presents only two main peaks. In Figs. 1b and 1c we show refinements of each main peak. These peaks do not present smaller isolated peaks. The peak near $`N=0`$ (peak I) is consistent with the hierarchical distribution expected for regular regions. The peak near $`N=64000`$ (peak II), however, may be associated to chaotic regions. We define as region I and region II the sets of initial conditions associated to peak I and peak II, respectively. Considering these initial conditions we find that all the points in the ball of radius $`r=0.23`$ and centre $`(I_1,\theta _1,I_2,\theta _2)=(0.278,0.510,0.450,0.761)`$ are in region II. We denote this ball by $`E_0`$, and we use it as an exit to analyse region II.

In Fig. 2a we show the escape time corresponding to points randomly taken on the curve $`C:=\{I_1=\theta _1=\lambda ,I_2=\theta _2=0.50.1<\lambda <0.2\}`$. The complicated structure of this graph is present in arbitrarily large magnifications of the interval. In Fig. 2b we show a $`50`$ times magnification that exhibits this property. That is a graphic characteristic of fractal dimension. In fact, a numerical computation of the uncertainty dimension in the interval of Fig. 2a results in $`d=0.95\pm 0.01`$ for $`10^{13}<\epsilon <10^9`$ ($`\pm 0.01`$ represents the statistical error). In the interval of Fig. 2b the dimension results in $`d=0.97\pm 0.01`$ for $`10^{13}<\epsilon <10^9`$. By numerically estimating the dimension in smaller and smaller intervals, we approach asymptotically to $`d=1`$. This result is consistent with the nonhyperbolic character of the system, since in nonhyperbolic systems the invariant set dimension is supposed to be maximal . Independently of the exact value of $`d`$, the fact that $`0<d1`$ is enough to conclude that region II is chaotic.

Now, let us consider the section $`S:=\{(I_1,\theta _1,I_2,\theta _2)I_2=\theta _2=0.5\}`$. In order to determine the regular and chaotic regions of $`S`$, we compute the intersection with $`S`$ of the attraction basin associated to the exit $`E_0`$. For initial conditions taken on a grid of $`400\times 400`$, with a good approximation, the chaotic points correspond to orbits that outcome in less than $`50000`$ iterations. Both chaotic and regular regions are plotted in Fig. 3, from which some physical results can be directly obtained. For example, since the chaotic region contains parts of the lines $`I_1=0`$ and $`I_1=1`$, the periodicity in $`I_1`$ implies that the chaotic region actually runs from $`I_1=\mathrm{}`$ to $`I_1=+\mathrm{}`$ . Thus, the evolution of an initial condition in the chaotic region goes to arbitrarily large energies.

In addition, we compute the chaotic fraction of the phase space volume. The attraction basin of $`E_0`$ is estimated by evolving 150000 random initial points over 50000 iterations. For $`K=0.5`$ the chaotic fraction results in $`c_f=0.975\pm 0.005`$. The confidence on this result remains in the fact that no significant changes are observed for 100000 and 400000 iterations. As a function of the parameter $`K`$, the chaotic fraction goes from zero for $`K=0`$ (nonchaotic) to one for $`K1.1`$ (completely chaotic).

## 5 Final remarks

In this communication we presented a fractal method to study chaos in closed systems of several dimension, the FMCS. The method applies to conservative systems in general, not necessarily Hamiltonian. The FMCS is simple from the conceptual viewpoint and is of easy numerical implementation, since it consists of the adequate definition of exits and the subsequent analysis of the corresponding attraction basins and invariant sets.

The importance of this method is double: (1) In classical systems, that are provided by an absolute time parameter, it appears as a systematic method to study chaos in phase spaces of several dimensions; (2) In relativistic systems, that are invariant under space-time diffeomeophisms, this invariant method presents the nice property of avoiding coordinate effects, i.e. the results are independent of the space-time parameters used.

Finally, we consider the limitations of our method. The first one concerns the difficulty of the method in locating small chaotic regions. The method is more efficient in systems with large chaotic regions. In addition, the definition of exits completely inside the chaotic regions may be, sometimes, impossible. The difficulty is due to the presence of small regular regions embedded in the chaotic regions. The effect of these small regions is expected to be negligible, however. The last problem refers to points near the boundaries between chaotic and regular regions. For these points, it is difficult to determine whether they are chaotic or regular. All these problems are intrinsic of numerical methods and are also present, for instance, in the Poincaré section method.

ACKNOWLEDGMENTS

The authors thank F. Bonjour, A.P.S. de Moura, M.T. Ujevic and R.R.D. Vilela for their valuable comments, as well as Fapesp and CNPq for financial support.