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# On Financial Markets Trading

## Introduction

The dynamics of the stock market oscillations is still object of a great debate. Variation of stock prices is usually considered a random process and there are many alternatives about the proper model of the distribution of return. In any case, some universal features have been found: They resemble the scaling laws characterizing physical systems dominated by the interaction of a large number of units. It is therefore of a great interest the introduction of a model that is able to reproduce these aspects through a proper tuning of its parameters. Also interesting is the understanding of the direct influence of them, provided they have a physical meaning.

Previous models are all essentially based on the assumption that two different kinds of economic agents are interacting in the market: Some authors bischi  call them *dealers* and *savers*, others lux\_nature  use the names *fundamentalists* and *noise traders* (further distinguishing between optimistic and pessimistic), others more bak  say *rationals* and *chartists*. If one goes into the details of these models, one sees that *fundamentalists* follow the premise of the efficient market hypothesis in that they expect the price to follow the fundamental value of the asset. A fundamentalist trading strategy consists of buying when the actual market price is believed to be below the fundamental value and selling in the opposite case. *Noise traders*, on the other hand, do not believe in an immediate tendency of the price to revert to its underlying fundamental value: They try to identify price trends and consider the behavior of other traders as a source of information, giving rise to the tendency towards *herding*.

Looking at the scaling law characterizing physical systems where large numbers of units interact haken ; galluccio ; mant\_nature ; mantegna , anyway, one observes that there is no need to introduce different classes of agents. Since the details of the circumstances governing the expectations and decisions of all the individuals are unknown to the modeler, the behavior of a large number of heterogeneous agents may best be formalized using a probabilistic setting. Such a statistical modeling concept has a certain tradition in the so-called *synergetics* literature haken  which has adopted techniques from elementary particle physics to study various problems of social interactions among humans ramsey . In a statistical approach the properties of macro variables are not necessarily identical to those of the corresponding micro variables nor does the mere aggregation of micro components always yield sensible macroeconomics relationships.

The most important aspect to be taken into account, therefore, is the behavior of the single particle and the coupling between units. A realistic model, in our opinion, should be able to avoid the distinctions among classes of traders, because they introduce some collateral problems to be solved. In lux\_nature , for instance, it is necessary to let people move from one group to another and to introduce an exogenous change of the fundamental value, but these two requirements sound somehow artificial. It is in fact clear that without the fundamentalists the price would follow just one trend at infinitum and without the noise traders the price would never escape the range of its fundamental value. In bak  this fact becomes clear, since already a 20% of fundamentalists is enough to confine the market price within the range of the rational traders. Just very short deviations occur before common sense was restored. Some authors even assume that the relative changes of the fundamental value are Gaussian variables, leading to the completely unrealistic situation where rational traders do invest according to some source of randomness.

In lux\_nature  the authors want to show that although the *news arrival process* lacks both power-law scaling and any temporal dependence in volatility yousse , their model generates such a behavior as the result of the interactions between agents. But then one realizes that the market price follows very closely the fundamental value, i.e. it is itself almost random. In lux2 , furthermore, it has been shown that behavioral models can produce a shape of the *return distribution* remarkably similar to that derived from empirical data; therefore any unobservable news arrival process is not necessary in order to explain the salient characteristics of empirical distributions of returns. On the contrary, the high peaks and fat tails property can be derived from the working of the market process itself.

In our model there is only one type of investor, whose goal is maximizing the profit while minimizing the risk. Every trader has a limited amount of money and a given disposition towards investment. Furthermore the time comes into account, since a given gain has a different meaning whether realized within few weeks or after several years. At the beginning of the simulation, one agent is supposed to be the central bank responsible of the *Initial Public Offer* (IPO): All the shares belong to one agent. We provide a mechanism to generate news and advertisements as a way to introduce a global coupling into our model. During the IPO, traders feel a strong pressure to buy and in fact almost all of them want to order some quotas. Since the bank responsible of the IPO cannot buy back any shares at the moment, this transient has a limited length and the simulation enters the permanent regime after few iterations. The main building blocks of the model are the price formation and the book, where all the pending orders are stored. Every trader, when willing to buy a share, has to identify a fair price according to past values of the price, opinion of the media and suggestions coming from acquaintances. This is the price with which he/she would like to enter the market; starting from it every agent keeps in mind a target price and a stop-loss price (respectively according to the desired gain and the maximum loss). They are of fundamental importance to decide whether and when to sell some shares, together with a threshold in time. We neither introduce any fundamental price nor make use of any exogenous input. In the following sections we describe the model in more details, present some simulation runs and study the influence of the parameters.

## The model

We consider $`N`$ traders who want to trade a stock with $`M`$ shares on a common market. For simplicity only one stock is involved in the model. The information related to every trader are the following:

* Initial amount of money: According to zipf ; marsili ; zipf2 ; takayasu , it is likely that the Zipf’s law is quite universal. On the light of this observation, we have decided to distribute the money to traders following such a distribution. A lot of money to a small amount of agents, few resources to the majority of people.
* Inclination towards investment: Usually traders tend to keep cash a part of their resources, in order to be able to have money to exploit the market at special time.
* Number of shares owned.
* List of friends with which sharing information. Through this local coupling we are able to model the herding behavior. In marsili  it has been shown that interactions of order higher than pairwise are not relevant in the dynamics that lead to Zipf’s law.
* Invested money, to keep trace of the average buying price for further purchase.
* Cash: Amount of resources immediately available, sometimes called liquid.
* Expected gain, randomly chosen between $`g_{min}`$ and $`g_{max}`$. Once such a profit has been realised the trader wants to sell the shares in order to convert this invested money into cash.
* Maximum loss, randomly chosen between $`l_{min}`$ and $`l_{max}`$. It is sometimes better to sell the shares losing some money than keeping them during a crash (and therefore losing more money after that).
* Personal target price, decided when inserting the buying order.
* Personal stop loss, decided when inserting the buying order.
* Threshold: Amount of time after which the trader may start to change idea about the investment: In real situation the gain alone is not enough to say whether an investment has been a good one or not. Everyting has to be related with time (10% gain in one year is of course a worst investment than 5% gain in one month if we do not consider speculation taxes).

When an agent wants to trade, a new record in the book is created. All the orders are stored according to the type (buy or sell), to the price and to the submission time. A transaction occur whenever the cheapest price among the sell list matches with the most expensive offer in the other list: That price defines the market price of the stock at that particular instant of time (tick). In the following table we can see the first five levels of the book. Every line contains information about time, trader, number of involved shares and desired price. Entries are ordered according to the price (and eventually to the time for equal prices), in a decreasing way for the buying list and in an increasing manner for the selling list.

TABLE 1. Example of the first five levels of the book. No transaction can take place because the highest buying price is smaller than the cheapest selling order. Entries are ordered according to price and occurrence time.

Once terminated the IPO phase, a typical simulation iteration involves the following steps:

* Selection of trader: This is done in a completely random way, without taking into account the different weight of agents, nor any other characteristic. This part represents material for a future work, where we can introduce some feedback between the type of trader and how often he/she trades.
* Control of the presence of some pending order: The trader has NO pending order.

+ Check whether the trader owns shares. If the trader owns NO share, then:

    - Evaluate the probability of a buying order for the trader. Formulate the fair price according to Eq.1 and target (stop loss) price according to expected gain (maximum loss).
    + Else (the trader has one pending order):

    - Check the market price and since when the trader owns the shares. If the actual price is below the stop loss then evaluate the probability that the trader performs a caution sell and the probability related to an averaging purchase. This decision is taken according to the news suggestions (buy, keep or sell) and to the available amount of money.

        If the market price is over the target then the trader will sell all the shares, inserting a limit order with a price in the range (target price, market price).

        If the price is in the range (stop-loss price, target price) and the trader has bought the shares a long time ago (longer than the threshold), evaluate the probability to sell, inserting a limit order at the previously computed target price.
* Else (for simplicity we suppose that every trader cannot afford more than one pending order simultaneusly):

+ Check the kind of the order. If it is a request to SELL, then:

    - If the order is sufficiently old (older than the threshold), then evaluate the probability that the trader decides to remove it.
        - If the market price is below the stop loss price, then evaluate the probability that the trader performs a market sell or an averaging buy.
    + Else (request to BUY):

    - Evaluate the probability that the trader decides to convert the limit order in a market order. This is done according to the media and the acquaintances.
        - Compare the time with the threshold: If the order is too old, then evaluate the probability that the trader removes the order. It is also possible to change just some parameters of the order.
* Check the book. If there is a price-matching (the cheapest selling order equals the highest buying price), then:

+ Define this price as the market price at the actual time (tick).
    + If the buyer has got all the desired shares then this buying order is removed from the list and the trader can immediately place a selling order (through an evaluation of the probability).
    + If the seller has been able to sell all the desired shares, then this selling order is removed from the corresponding list.

When formulating the fair price, every trader makes the decision according to the opinion of some acquaintance (contained in the price $`p_1`$), to the media (they suggest the price $`p_2`$) and to some past values of the stock price itself (through the forecasted price $`p_3`$, inspired by baptista ).

* $`p_1`$ represents the opinion of the friends of the selected trader. Every agents who owns shares, has his/her own target price. We average all the target price of the friends which are making profit (who would believe to people which are losing money?) and then establish an *enter price* rescaling it by the expected gain ($`eg`$) of the selected trader: $`p_1=\frac{1}{n}_{i=1}^ntp_i(1eg)`$
* $`p_2`$ represents the target price broadcasted by the media, in our model an internal global information of the system111This behavior is realistic because in real life these infos are still internal, since also media and the big istitutions invest in the stock market and often broadcast biased news in order to make easy money.. It is generated starting from the last price $`p_u`$, comparing the current ratio between the number of buyers and the number of sellers in the book ($`b_u`$ stands for book unbalance) with the parameter $`B`$ (unbalance of the book), in the following way: $`p_2=p_u(1+r_{max})`$ if $`b_u>B`$, $`p_2=p_2`$ if $`\frac{1}{B}<b_u<B`$ or $`p_2=p_u(1r_{max})`$ if $`b_u<\frac{1}{B}`$.
* $`p_3`$ represents the expected price due to the actual trend. It is formulated taking into account the trend over the past *MEM* prices and comparing it with the last price, $`p_3=p_u+(p_up_{trend})`$.

Finally, the price $`p`$ is obtained as a weighted average of $`p_1`$ $`p_2`$ and $`p_3`$ in the following way:

$$p=\frac{p_1}{\alpha _1}+\frac{p_2}{\alpha _2}+\frac{p_3}{\alpha _3}$$
(1)
with $`\alpha _1`$, $`\alpha _2`$ and $`\alpha _3`$ such that $`_{i=1}^3\frac{1}{\alpha _i}=1`$.

## Simulation Runs

In every model there is the effort to avoid a parameter explosion: It is in fact clear that, with a sufficiently large number of degrees of freedom, one can approximate and reproduce every behavior and any feature of a given system. When modeling, nevertheless, one has to keep in mind that a model is meanungful as long as the parameters have a clear meaning and a directly observable influence.

The result of a typical simulation run is shown in Fig.1: The upper panel is related to the market price, whereas the lower panel reports about the corresponding amount of exchanged shares. We can clearly see the IPO phase lasting few hundreds of ticks, where the price remains constant because the bank offers the shares to the traders at a suggested value. After this transient, the pressure made from people without shares becomes visible: The volumes are high and the price tends to raise. Letting the time evolve, one runs into a tranquil period, with a slowly oscillating price and very low volumes: Owners do not want to sell because they hope to get more money if the wait a little bit, agents without shares want to buy at a lower price. This dynamical equilibrium is unstable: After a significant increase in the volumes a small burst occurs and the price increases to a more suitable value for owners. A rally is usually followed by a crash (a kind of settlement), as reported in platt  under the name of *on-off intermittency*, an aperiodic switching between static, or laminar, behavior and chaotic bursts of oscillations.

We explain in the following the origin, the tuning and the effect of the parameters involved in the model.

* Number of traders N: The number of active agents trading on the market.
* Threshold T: The number of ticks after which the trader may start to have some doubts about the performed investment. This value ranges among a decade in order to model the different temporal horizons of the investments (differences between short-time speculators and long-time traders).
* Number of shares S and IPO’s price I: Their product defines how the company is initially worth. The value of these two parameters is chosen after an analysis of the typical IPOs taking place in the european stockmarket.
* Amount of money M initially distributed among the traders. As in the case of the threshold, this is not equal for all the players. Differently from the threshold, the initial wealth of the traders follows a Zipf’s distribution. Inspired by zipf ; marsili ; zipf2 ; takayasu  we have decided to distribute the richness according to a Zipf’s law in the following way: the 20% of the traders posses around the 80% of M and among the two groups this rule is applied again in a recursive way222As already mentioned in the text, the Zipf’s law is quite universal. Just to provide some examples, the directory size in a hard drive, the CPU time used by processes in a workstation, the number of hits per homepages, the income distribution in companies, the debts of bankrupt companies, the city distributions, they all follow a Zipf’s law.. In this way we are able to model the difference between a normal agent and an istitutional investor and the different effect they produce when they decide to enter the market. Anyway a minimal value of money m is provided to all the traders and added to the amount coming from the previous distribution.
* Length of the past values’ list MEM: Chartists look for trends and patterns in the historical time series of the market price. Given the very short correlation in time, it is not so meaningful to look to much in the past, but some differences arise according to the tuning of this value. MEM is not constant for all the traders, since some of them have access to more information than others.
* Unbalance of the book B: This value takes into account how balanced are the sell and the buy list with respect to each other. In case of a strong asymmetry an automatic mechanism generates news and advertisements. Through this parameter we introduce a global coupling in the model.

As already mentioned, universal characteristics exhibited by financial prices comprise a distribution with fat tails (events with a distance bigger than $`3\sigma `$ from the average return are not so uncommon as a Gaussian distribution would forecast) and a correlation in the volatility (alternation between tranquil and turbulent periods). In Fig.2 we show the presence of a strong persistence in the volatility. This is done estimating the self-similarity parameter H peng  for raw and absolute returns (being the latters a measure of volatility). The lower panel of Fig.2 is related to raw returns: A random time series with the same variance of our simulated evolution of the price gets a value H=0.50, corresponding to brownian motion. A time series of a stock belonging to the S&P500 index gets a sligtly smaller value (H=0.41), with our simulation we have got H=0.55. The prove of the presence of correlations in the volatility comes from the upper panel, when considering absolute returns. The random time series is still uncorrelated (H=0.53), while a time series coming from a real or a simulated stockmarket shows a kind of memory (H=0.84 and H=0.85 respectively).

Fat tails are detectable through the probability density function (PDF) of the returns. In Fig.3 we show the PDF of our simulated time series together with a gaussian distribution of returns having the same standard deviation. Extreme events happen with a higher frequency in the simulation, giving raise to the typically observed alternation between tranquil period, rally days and crashes.

## Parameters’ Analysis

Let us consider now the following quantity P, what we call *buying factor*:

$$𝐏=\frac{𝐌+\mathrm{𝐦𝐍}}{\mathrm{𝐒𝐈}}.$$
(2)
We have obtained significant results only if P belongs to the interval $`[4,8]`$333Just to give some colors to these numbers, we can imagine the following situation, not too far away from the reality in a big european country. Suppose that 10 million of traders are interested in trading a given new stock and they would like to invest, on average, 3000 EUROs. They have an investing power of 30 billions of EUROs. Suppose now that the new stock comes out with 100 million of shares at an IPO’s price of 50 EUROs. The initial value of the company is 5 billions of EUROs and the value of P is 6. and we have the following explanation. The numerator of Eq.2 indicates the total amount of money that the traders could invest in the stock. The denominator, on the other hand, is an indication of the value of the company at the initial public offer. If people do not have enough money (small value of P), they are not encouraged to trade and the market price decays. If the agents have a too big amount of resources compared to the company’s value (i.e. P is big), then the market price starts to increase until the resource limit is reached.

This represents, on our opinion, a realistic upper limit for the market price, since nobody would buy anything if they cannot afford it (maybe the reality is a little bit different; traders stop buying shares when the price is too high not because they do not have money, but because they believe that the price is too far away from a fair price for the given stock, a concept that could be modeled with the introduction of a fundamental value, something that we strongly want to avoid).

In Fig.4 we present the dependence on the *buying factor* of a typical simulation run. Values of P in the range $`[4,8]`$ present the already discussed features. When $`𝐏=10`$ the price increases very fast, namely it twices after a few thousand of iterations. With $`𝐏=2`$, the model is not able to end the simulation of the IPO phase: Although traders had enough money to buy all the shares available at the bank, they do not want to invest too much at the beginning, according to their *inclination towards investment*.

One comment about demand and supply. It had been a common sense in economics for a long time that demand and supply balances automatically, however, it becomes evident that in reality such balances are hardly be realized for most of popular commodities in our daily life verri ; takayasu2 . The important point is that demand is essentially a stochastic variable because human action can never be predicted perfectly, hence the balance of demand and supply should also be viewed in a probabilistic way. If demand and supply are balanced on average the probability of finding an arbitrarily chosen commodity on the shelves of a store should be 1/2, namely about half of the shelves should be empty. Contrary to this theoretical estimation shelves in any department store or supermarket is nearly always full of commodities. This clearly demonstrates that supply is much in excess in such stores.

In general the stochastic properties of demand and supply can be well characterized by a phase transition view which is consisted of two phases: The excess-demand and excess-supply phases. It is a general property of a phase transition system that fluctuations are largest at the phase transition point, and this property also holds in this demand-supply system. In the case of markets of ordinary commodities, consumers and providers are indipendent and the averaged supply and demand are generally not equal. The resulting price fluctuactions are generally slow and small in such market because the system is out of the critical point.

On the contrary in an open market of stocks or foreign exchanges, market is governed by speculative dealers who frequently change their positions between buyers and sellers. It is shown that such speculative actions make demand and supply balance automatically on average by changing the market price, resembling a kind of *self organized criticality*. Fig.5 is in total agreement with that: Contrary to bak  we do not need to impose that the number of the shares has to be half of the number of traders in order to get a balance between demand and supply. The three circles in the upper panel indicate the most extreme events taking place in the price evolution: There is a corresponding movement in the book and a peak in the volumes. As the system is always at the critical point the resulting price fluctuations are generally quick and large takayasu2 . This result is in agreement with sornette , where the authors present an analogy between large stock market crashes and critical points with log-periodic correction to scaling: Complex systems often reveal more of their structure and organization in highly stressed situations than in equilibrium.

In Fig.6 we report on the influence of the media on the market price. In particular we note that a small value of B (B=2, lower panel) forces with more strength the underlying price than a bigger value of the unbalance parameter (B=3, upper panel). The power of the advertisement!

The effect of the parameter MEM is shown in Fig.7. Large fluctuactions are present as a consequence of the herding behavior: Traders can ask each other about values and look at the history of the market. But, as shown in Fig.2, correlations among prices are very short. As a consequence, if the parameter MEM becomes too big, then the agents tend to take into account events that are uncorrelated and thus they perform a kind of averaging on the price: No trend has the change to fully develop itself because it is only a small part of the window into which every trader is looking to.

In Fig.8 we show the performance of each trader. Agents are ordered according to the amount of money they have received at the beginning of the simulation: The leftmost trader was the richest one, the rightmost was the poorest one. The gain is given in percent. We note a very interesting feature, namely traders with more power (money) are systematically more lucky than the others. This is because they produce a bigger echo when they trade: If one wants to buy a significant fraction of a stock, then the price will rise up and maybe someone else will try to do the same, having identified a trend in the price and wanting to use this chance to make money. As a consequence, the price may really increase of such an amount sufficient for the big trader to get the desired profit and to decide to sell. After this operation, there is no immediate chance for the small agents to get money, since the price is decreasing now as a consequence of the action of the powerful trader. Small agents perform with a delay such that they are not able to get advantage from every speculative event. They are always waiting for the events, not being able to induce them.

Presenting this result, anyway, we assume the following, not so realistic, thing: The richness of a trader is given by the sum of his/her cash and the money he/she has invested in shares. We should note that these two numbers are different: One can use the latter provided he/she has sold the shares. Considering the invested money as real money we suppose (without any reason) that the trader is able to sell the shares exactly at the buying price. This is obviously not true. Fig.9 shows a consequence of this assumption: the virtual richness increases (decreases) when the market price increases (decreases), with a small delay. We define virtual this richness because one is sure to own a certain amount of share but not to have a certain amount of money, unless he/she is able to perform the conversion from shares to money just selling them.

The market we are simulating is a closed one, i.e. the total amount of involved money must remain constant444This would not be the case in presence of commissions, a percentage of money to be paid to the bank for every transaction.. But Fig.9 shows the opposite: The virtual richness is positively correlated with the market price (delayed of a small amount of time). Although not shown in Fig.9, if the price comes back to the IPO value555It should not only come back to the IPO value, but also remain constant for a sufficiently long time, in order to let all the traders sell and buy the shares exactly at this price. In other words, it should happen that all the shares have been traded at the IPO price, then the total richness comes back to the original value. So, one way of getting rid of the problem is to replace the invested money with the number of owned shares times the IPO price. Doing so, the total richness remains constant, assuming the initially distributed value all the simulation long.

In Fig.10 we report the richness of every agent after the conversion from shares to cash, with the IPO as buy-back price. The systematicity of Fig.8 is no longer present. The reason is the following: Big traders loose all their advantages because just during a speculative period they cannot proceed and convert the shares into cash because we have decided to stop the simulation (and to convert their shares into cash at the IPO price instead of the current *virtual* market price).

Maybe this is not a proper manner to act, but it is the only way to maintain isolated the system and to avoid any artificial production of money. As a consequence of this abrupt end, many traders realize to have done a mistake in performing a transaction because we impose from outside a price for the shares which is different compared to the self organized one. This explains why according to the distribution of Fig.10 all the traders get similar performance independently from their initial status.

We are interested now in the association of a real temporal scale to our tick time. To this end, we have performed a correlation analysis on our simulations and compared it to the results presented in mantegna ; liu . Since the autocorrelation function vanishes after approximately 20 ticks and the typical correlation length in financial time series is supposed to be around 20 minutes, we can reach the conclusion that one of our tick corresponds to one real-life minute. This is the reason according to which we have decided to use the following value of the time related parameters during the simulation runs:

* Total number of iterations, namely total number of ticks = $`10^6`$ (10 years).
* Threshold = 10000 (1 month).
* Threshold variability $`[0.1,1]`$. Combined with the threshold, this gives a time variable from a minimum of 1 month to a maximum of 1 year. After this time, traders start to ask themselves what to do with the shares if the price remains too stable.

## Conclusions

In this paper we have introduced a model for the stockmarket whose parameters have a physical meaning. They have been tuned as a direct consequence of observations of a typical trading activity. The main issue we wanted to address is that our model is able to reproduce the two main characteristics of empirical data, namely correlated volatility and fat tails of the PDF of returns, with only one class of agents sharing the same goal: They all want to become as rich as possible. In particular we do not need any external input nor a fundamental price, whose evolution would require some artificial assumptions. What we need is just a proper set of constraints: Traders have a limited amount of money, they can wait only for a limited time, they have some desired gain in mind and they do not want to lose too much money. Furthermore they do not invest all the money they have at disposal, since they want to use it in the most appropriate and less risky way. We have proved the crucialilty of the parameters, showing the dependance of a typical simulation run from their realistic tuning. Interpretations of the meaning of these values are also given, as they are mainly in agreement with every-day situations. In our opinion a model is really useful only as far as its parameter are completely understandable and influence directly the evolution of the market price.


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# Bounds for Lepton Flavor Violation and the Pseudoscalar Higgs in the General Two Higgs Doublet Model using 𝑔-2 muon factor

## Abstract

Current experimental data from the $`g2`$ muon factor, seems to show the necessity of physics beyond the Standard Model (SM), since the difference between SM and experimental predictions is 2.6$`\sigma `$. In the framework of the General Two Higgs Doublet Model (2HDM), we calculate the muon anomalous magnetic moment to get lower and upper bounds for the Flavour Changing (FC) Yukawa couplings in the leptonic sector. We also obtain lower bounds for the mass of the pseudoscalar Higgs ($`m_{A^0}`$) as a function of the parameters of the model.

Current muon anomalous magnetic moment $`a_\mu `$ measurement has challenged Standard Model(SM) and seems to open a window for new physics. Due to the high precision in $`a_\mu `$ measurement, it gives very restrictive bounds on physics beyond the SM. Although $`a_e`$ measurement is about 350 more precise marciano , $`a_\mu `$is much more sensitive to New Physics since contributions to $`a_l`$are usually proportional to $`m_l^2`$.

The most accurate measurement of $`a_\mu `$hitherto, has been provided by the Brookhaven Alternating Gradient Syncrotron g2 positive . Their data have an error one third that of the combined previous data Caso , ref g2 positive  reports

$$a_{\mu ^+}=11659202\left(14\right)\left(6\right)\times 10^{10}.$$
(1)
On the other hand, SM predictions for $`a_\mu `$ has been estimated taking into account the contributions from QED, Hadronic loops and electroweak corrections. The final current result is marciano ; g2 positive

$$a_\mu ^{SM}=11659159.6\left(6.7\right)\times 10^{10}.$$
(2)
Taking into account (1) and (2) is obtained

$$\mathrm{\Delta }a_\mu ^{NP}=a_\mu ^{\mathrm{exp}}a_\mu ^{SM}=42.6\left(16.5\right)\times 10^{10},$$
(3)
where $`a_\mu ^{\mathrm{exp}}`$is the world average experimental value. Consequently at $`90\%`$ C.L.

$$21.5\times 10^{10}\mathrm{\Delta }a_\mu ^{NP}63.7\times 10^{10}.$$
(4)
$`\mathrm{\Delta }a_\mu ^{NP}`$gives the room available for New Physics, so $`a_\mu ^{exp}`$ differs from $`a_\mu ^{SM}`$ approximately in $`2.6\sigma `$. Therefore, physics beyond the SM is needed to achieve an acceptable theoretical experimental agreement. The most studied contributions to $`a_\mu `$has been carried out in the framework of radiative muon mass models as well as the Minimal Supersymmetric Standard Model (MSSM), E$`_6`$string-inspired models, and extensions of MSSM with an extra singlet estatus .

Moreover, a very interesting suggestion to conciliate the new experimental data with theoretical predictions is to consider models that includes FCNC at tree level. Interactions involving FCNC are forbidden at tree level in the SM, but could be present at one loop level as in the case of $`bs\gamma `$ bsg , $`K^0\mu ^+\mu ^{}`$ kmm , $`K^0\overline{K}^0`$ koko , $`tc\gamma `$ tcg  etc. Many extensions of the SM permit FCNC at tree level. For example, the introduction of new representations of fermions different from doublets produce them by means of the Z-coupling 2 . Additionally, they are generated at tree level by adding a second doublet to the SM wolf , such couplings can be gotten as well in SUSY theories without R-parity. Some other important new sources for FCNC might be provided by a muon collider, as the processes $`\mu \mu \mu \tau (e\tau )`$ mediated by Higgs exchange Workshop , SherCollider , which produce Lepton Flavor Violation (LFV).

However, there are several mechanisms to avoid FCNC at tree level. Glashow and Weinberg gw  proposed a discrete symmetry to supress them in the Two Higgs Doublet Model (2HDM) which is the simplest one that exhibits these rare processes at tree level. There are two kinds of models which are phenomenologically plausible with the discrete symmetry imposed. In the model type I, one Higgs Doublet provides masses to the up-type and down-type quarks, simultaneously. In the model type II, one Higgs doublet gives masses to the up-type quarks and the other one to the down-type quarks. But the discrete symmetry gw  is not compulsory and both doublets may generate the masses of the quarks of up-type and down-type simultaneously, in such case we are in the model type III III . It has been used to search for FCNC at tree level ARS , Sher91 .

Recently, the 2HDM type III has been discussed and classified us , depending on how the basis for the vacuum expectation values (VEV) are chosen and according to the way in which the flavor mixing matrices are rotated. In brief, the reference us  shows that there are two types of rotations which generate four different lagrangians in the quark sector and two different ones in the leptonic sector. The well known 2HDM types I and II, could be generated from them in the limit in which the FC vertices vanish. It has been pointed out that the phenomenology of the 2HDM type III is highly sensitive to the rotation used for the mixing matrices.

In this paper, we calculate the contributions to $`\mathrm{\Delta }a_\mu `$ coming from the 2HDM, which includes FCNC at tree level. We will constrain the FC vertex involving the second and third charged leptonic sector by using the result for $`\mathrm{\Delta }a_\mu ^{NP}`$, equation (4). Additionally, we get lower bounds on the pseudoscalar Higgs mass by taking into account the lower experimental value of $`\mathrm{\Delta }a_\mu ^{NP}`$ at $`90\%`$ C.L. by making reasonable assumptions on the FC vertex.

The Yukawa’s Lagrangian for the 2HDM type III, is as follow

$`\mathrm{\pounds }_Y`$ $`=`$ $`\eta _{ij}^U\overline{Q}_{iL}\stackrel{~}{\mathrm{\Phi }}_1U_{jR}+\eta _{ij}^D\overline{Q}_{iL}\mathrm{\Phi }_1D_{jR}+\eta _{ij}^E\overline{l}_{iL}\mathrm{\Phi }_1E_{jR}`$ (5)
$`+`$ $`\xi _{ij}^U\overline{Q}_{iL}\stackrel{~}{\mathrm{\Phi }}_2U_{jR}+\xi _{ij}^D\overline{Q}_{iL}\mathrm{\Phi }_2D_{jR}+\xi _{ij}^E\overline{l}_{iL}\mathrm{\Phi }_2E_{jR}+h.c.`$
where $`\mathrm{\Phi }_{1,2}`$are the Higgs doublets,$`\eta _{ij}`$and $`\xi _{ij}`$are non-diagonal $`3\times 3`$matrices and $`i`$, $`j`$ are family indices. In this work, we are interested only in neutral currents in the leptonic sector. We also consider a CP-conserving model in which both Higgs doublets acquire a VEV,

$$\mathrm{\Phi }_1_0=\left(\begin{array}{c}0\\ v_1/\sqrt{2}\end{array}\right),\mathrm{\Phi }_2_0=\left(\begin{array}{c}0\\ v_2/\sqrt{2}\end{array}\right).$$

The neutral mass eigenstates are given by moda

$`\left(\begin{array}{c}G_Z^0\\ A^0\end{array}\right)`$ $`=`$ $`\left(\begin{array}{cc}\mathrm{cos}\beta & \mathrm{sin}\beta \\ \mathrm{sin}\beta & \mathrm{cos}\beta \end{array}\right)\left(\begin{array}{c}\sqrt{2}Im\varphi _1^0\\ \sqrt{2}Im\varphi _2^0\end{array}\right),`$ (12)
$`\left(\begin{array}{c}H^0\\ h^0\end{array}\right)`$ $`=`$ $`\left(\begin{array}{cc}\mathrm{cos}\alpha & \mathrm{sin}\alpha \\ \mathrm{sin}\alpha & \mathrm{cos}\alpha \end{array}\right)\left(\begin{array}{c}\sqrt{2}Re\varphi _1^0v_1\\ \sqrt{2}Re\varphi _2^0v_2\end{array}\right)`$ (19)
where $`\mathrm{tan}\beta =v_2/v_1`$and $`\alpha `$is the mixing angle of the CP-even neutral Higgs sector. $`G_Z`$is the would-be Goldstone boson of $`Z`$ and $`A^0`$is the CP-odd neutral Higgs.

Now, to convert the Lagrangian (5) into mass eigenstates we make the unitary transformations

$$E_{L,R}=\left(V_{L,R}\right)E_{L,R}^0$$
(20)
from which we obtain the mass matrices

$$M_E^{diag}=V_L\left[\frac{v_1}{\sqrt{2}}\eta ^{E,0}+\frac{v_2}{\sqrt{2}}\xi ^{E,0}\right]V_R^{},$$
(21)
where $`M_E^{diag}`$ is the diagonal mass matrix for the three lepton families. From (21) we can solve for $`\xi ^{E,0}`$obtaining

$$\xi ^{E,0}=\frac{\sqrt{2}}{v_2}V_L^{}M_E^{diag}V_R\frac{v_1}{v_2}\eta ^{E,0}.$$
(22)
which we call a rotation of type I. Replacing it into (5), the expanded Lagrangian for the neutral leptonic sector is

$`\mathrm{\pounds }_{Y\left(E\right)}^{\left(I\right)}`$ $`=`$ $`{\displaystyle \frac{g}{2M_W\mathrm{sin}\beta }}\overline{E}M_E^{diag}E\left(\mathrm{sin}\alpha H^0+\mathrm{cos}\alpha h^0\right)`$ (23)
$`+`$ $`{\displaystyle \frac{ig}{2M_W}}\overline{E}M_E^{diag}\gamma _5EG^0+{\displaystyle \frac{ig\mathrm{cot}\beta }{2M_W}}\overline{E}M_E^{diag}\gamma _5EA^0`$
$``$ $`{\displaystyle \frac{1}{\sqrt{2}\mathrm{sin}\beta }}\overline{E}\eta ^EE\left[\mathrm{sin}\left(\alpha \beta \right)H^0+\mathrm{cos}\left(\alpha \beta \right)h^0\right]`$
$``$ $`{\displaystyle \frac{i}{\sqrt{2}\mathrm{sin}\beta }}\overline{E}\eta ^E\gamma _5EA^0+h.c.`$
where the superindex $`(I)`$refers to the rotation type I. It is easy to check that Lagrangian (23) is just the one in the 2HDM type I moda , plus some FC interactions. Therefore, we obtain the lagrangian of the 2HDM type I from eq (23) by setting $`\eta ^E=0.`$ In this case it is clear that when $`\mathrm{tan}\beta 0`$ then $`\eta ^E`$ should go to zero, in order to have a finite contribution for FCNC at tree level.

On the other hand, from (21) we can also solve for $`\eta ^{E,0}`$instead of $`\xi ^{E,0}`$, to get

$$\eta ^{E,0}=\frac{\sqrt{2}}{v_1}V_L^{}M_E^{diag}V_R\frac{v_2}{v_1}\xi ^{E,0}$$
(24)
which we call a rotation of type II. Replacing it into (5) the expanded Lagrangian for the neutral leptonic sector is

$`\mathrm{\pounds }_{Y(E)}^{(II)}`$ $`=`$ $`{\displaystyle \frac{g}{2M_W\mathrm{cos}\beta }}\overline{E}M_E^{diag}E\left(\mathrm{cos}\alpha H^0\mathrm{sin}\alpha h^0\right)`$ (25)
$`+`$ $`{\displaystyle \frac{ig}{2M_W}}\overline{E}M_E^{diag}\gamma _5EG^0{\displaystyle \frac{ig\mathrm{tan}\beta }{2M_W}}\overline{E}M_E^{diag}\gamma _5EA^0`$
$`+`$ $`{\displaystyle \frac{1}{\sqrt{2}\mathrm{cos}\beta }}\overline{E}\xi ^EE\left[\mathrm{sin}\left(\alpha \beta \right)H^0+\mathrm{cos}\left(\alpha \beta \right)h^0\right]`$
$`+`$ $`{\displaystyle \frac{i}{\sqrt{2}\mathrm{cos}\beta }}\overline{E}\xi ^E\gamma _5EA^0+h.c.`$
The Lagrangian (25) coincides with the one of the 2HDM type II moda , plus some FC interactions. So, the lagrangian of the 2HDM type II is obtained setting $`\xi ^E=0.`$ In this case it is clear that when $`\mathrm{tan}\beta \mathrm{}`$ then $`\xi ^E`$ should go to zero, in order to have a finite contribution for FCNC at tree level.

In the present report, we calculate $`a_\mu `$ in the 2HDM with FC interactions. If we neglect the muon mass, the contribution at one loop from all Higgses is given by

$$\mathrm{\Delta }a_\mu ^{NP}=\frac{m_\mu m_l}{16\pi ^2}\underset{i}{}F(m_{H_i},m_l)a_i^2,$$
(26)
where

$$F(m_{H_i},m_l)=\frac{\widehat{m}_{H_i}^2\left(\widehat{m}_{H_i}^24\right)+\left[3+2\mathrm{ln}\left(\widehat{m}_{H_i}^2\right)\right]}{m_{H_i}^2\left(1\widehat{m}_{H_i}^2\right)^3}$$
(27)
with $`\widehat{m}_{H_i}=m_l/m_{H_i}`$ and $`m_l`$is the mass of the lepton running into the loop. The sum is over the index $`i=m_{h^0},m_{H^0},m_{A^0}`$. The coefficients $`a_i`$ are the Feynman rules for FC couplings involved.

If we take into account the experimental data (4), we get some lower and upper bounds on the mixing vertex $`\eta \left(\xi \right)_{\mu \tau }`$for the rotations of type I (II). In figure 1, we display lower and upper bounds for the FC vertices as a function of the $`\mathrm{tan}\beta `$ for both types of rotations with $`m_{h^0}=m_{H^0}=150`$ GeV and $`m_{A^0}\mathrm{}`$. For $`\mathrm{tan}\beta =1`$ the behaviour of the bounds for both rotations is the same. In the first case, rotation type I, the allowed region for $`\eta _{\mu \tau }`$ is between $`0.07\eta _{\mu \tau }0.13`$ for large values of $`\mathrm{tan}\beta `$. Meanwhile, for rotation type II, the allowed region for small $`\mathrm{tan}\beta `$ is the same. From Lagrangian (11), rotation type I, we can see that when $`\mathrm{tan}\beta 0`$, $`\eta _{\mu \tau }`$ should go to zero as well to mantain a finite contribution to $`\mathrm{\Delta }a_\mu `$. This behaviour can be seen from figure 1. For rotation type II is similar to the former but in the limit $`\mathrm{tan}\beta \mathrm{}`$.

In figure 2, we show lower and upper bounds for the FC vertex as a function of $`m_{H^0}`$ for rotation of type II when $`m_{h^0}=m_{H^0}`$ and $`m_{A^0}\mathrm{}`$. We see that the smaller value of $`\xi _{\mu \tau }`$ the larger value for $`\mathrm{tan}\beta `$. We only consider the case of rotation type II because there is a complementary behaviour as could be seen in figure 1.

Observe that according to the Feynman rules from (23) and (25), the scalar (pseudoscalar) contribution to $`\mathrm{\Delta }a_\mu ^{NP}`$eq. (27) is positive (negative). Such fact permits us to impose lower bounds on the pseudoscalar Higgs mass, by using the lower limit in eq. (4). According to this equation the room for new physics from $`g2`$ muon factor is positive definite, and it is a new feature from most updated results g2 positive .

Now, to take into account the experimental value (4), we should make a supposition about the value of the FC vertex. A reasonable assumption consists of taking the geometric average of the Yukawa couplings Cheng Sher  i.e. $`\eta \left(\xi \right)_{\mu \tau }2.5\times 10^3`$. Additionally, we shall use also the values $`\eta \left(\xi \right)_{\mu \tau }2.5\times 10^2`$ and$`\eta \left(\xi \right)_{\mu \tau }2.5\times 10^4`$which are one order of magnitude larger and smaller than the former. Using these suppositions and the experimental value (4) we get restrictions for $`m_{A^0}`$ and they are plotted in figures (3)-(5).

Figure 3 displays $`m_{A^0}`$vs$`\mathrm{tan}\beta `$using rotation type II with the three values of $`\xi _{\mu \tau }`$mentioned above and setting $`m_{h^0}=m_{H^0}`$with $`m_{h^0}=110,\mathrm{\hspace{0.33em}300}`$ GeV. It could be seen that in the limit of large $`\mathrm{tan}\beta ,`$the lower limit reduces to$`m_{A^0}m_{h^0}`$. The same behavior can be seen in rotation type I but the bound $`m_{A^0}m_{h^0}`$ is gotten in the limit of small $`\mathrm{tan}\beta .`$ We see that the smaller value of $`\xi _{\mu \tau }`$the stronger lower limit for $`m_{A^0}`$.

Figure 4 shows $`m_{A^0}`$vs$`m_{h^0}`$with $`\xi _{\mu \tau }=2.5\times 10^3,2.5\times 10^2`$and setting $`\mathrm{tan}\beta =1,\alpha =\pi /2`$and using $`m_{h^0}=m_{H^0}=110`$ GeV. With this settings, the value $`\xi _{\mu \tau }=2.5\times 10^4`$ is excluded. Using such specific arrangements, the bounds are identical in both types of rotations.

In figure 5 we suppose that $`m_{h^0}m_{H^0}`$ and the bounds are function of $`\mathrm{sin}\alpha `$. The above figure shows the sensitivity of lower bounds on $`m_{A^0}`$ with the mixing angle $`\alpha ,`$for rotation type II. The value $`\xi _{\mu \tau }=2.5\times 10^4`$is excluded again. The constraints are very sensitive for $`\xi _{\mu \tau }=2.5\times 10^3`$ respect to $`\mathrm{sin}\alpha `$ but rather insensitive for $`\xi _{\mu \tau }=2.5\times 10^2`$. The figure below shows $`m_{A^0}`$vs $`\mathrm{tan}\beta `$for $`m_{h^0}=110`$ GeV, $`m_{H^0}=300`$ GeV, $`\alpha =\pi /6,`$ for rotation type II and using the same three values of $`\xi _{\mu \tau }.`$The $`m_{A^0}`$ lower asymptotic limit for large $`\mathrm{tan}\beta `$is approximately $`m_{h^0}`$.

In conclusion, we have found lower and upper bounds for the FC vertex $`\eta \left(\xi \right)_{\mu \tau }`$in the context of the general 2HDM by using the allowed range for $`\mathrm{\Delta }a_\mu ^{NP}`$ at $`90\%`$ C.L. and utilizing several sets of values for parameters of the model. Additionally, in the limit $`m_{A^0}\mathrm{}`$ we get that for small (large) values of $`\mathrm{tan}\beta `$the allowed range for the FC vertex $`\eta _{\mu \tau }\left(\xi _{\mu \tau }\right)`$becomes narrower, and both upper and lower bounds go to zero in the rotation of type I (II).

On the other hand, we have gotten lower bounds on the pseudoscalar Higgs mass of the 2HDM coming from the $`g2`$muon factor, by using the experimental value of $`\mathrm{\Delta }a_\mu ^{NP}`$and making reasonable assumptions on the FC vertex $`\eta \left(\xi \right)_{\mu \tau }`$. Specifically, we have taken for $`\eta \left(\xi \right)_{\mu \tau }`$ the geometric average of the Yukawa couplings, and we also utilized values one order of magnitude larger and one smaller. Taking these three values for the FC vertex we find that the smaller value for $`\eta \left(\xi \right)_{\mu \tau }`$the more stringent lower bounds for $`m_{A^0}`$. Additionally, assuming $`m_{H^0}=m_{h^0},`$we show that in the limit of small (large) $`\mathrm{tan}\beta `$the lower bound of $`m_{A^0}`$becomes merely $`m_{A^0}m_{h^0}`$for rotation of type I (II). In the case of different scalar masses, there is still a lower asymptotic limit for $`m_{A^0}`$. Notwithstanding, these lower constraints on $`m_{A^0}`$should be consider carefully, since for $`\eta \left(\xi \right)_{\mu \tau }`$we can only make reasonable estimations but they are unknown so far.

This work was supported by COLCIENCIAS, DIB and DINAIN.


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# The gluon content of the photon from di-jet production at the 𝜸𝜸-collider

## 1 Introduction

A future linear $`\mathrm{e}^+\mathrm{e}^{}`$ collider in the few hundred GeV centre of mass (CMS) energy range, offers the opportunity for a high energy $`\gamma \gamma `$-collider bib-telnov , i.e. collisions of high energy photon beams with a high luminosity. This can be achieved by Compton-backscattering of photons off a laser beam on the electron and positron beams of the $`\mathrm{e}^+\mathrm{e}^{}`$ collider. Under the appropriate kinematical and geometrical conditions a narrow spectrum of high energy photons is produced, which can reach up to 80% of the original $`\mathrm{e}^+\mathrm{e}^{}`$ beam energy.

The QCD process of two-photon jet production has a large cross section, thus the measurements will be dominated by systematics. Jets can be produced in hard partonic scattering in direct and resolved processes. For resolved processes the photon converts first into a hadron with vector meson quantum numbers, or splits into a quark-antiquark pair. The collision of two resolved photons is called a double resolved process. A photon can also couple directly to the quarks of the resolved second photon (called single resolved process), or to another bare photon via a quark loop (called direct process). Examples of these processes are shown in Fig. 1.

The resolved processes involve the hadronic component from one or both photons and are thus sensitive to the hadronic structure of the photon. Measurements of the hadronic structure of the photon have been made in $`\mathrm{e}\gamma `$ scattering at $`\mathrm{e}^+\mathrm{e}^{}`$ colliders over the last 20 years bib-nisius . These measurements are predominantly sensitive to the quark content of the photon, although they also start to constrain the gluon content of the photon via scaling violations at low values of $`x_\gamma `$. Measurements of jet cross sections on the other hand are directly sensitive to both the quark and gluon content of the photon and can thus, in combination with results from $`\mathrm{e}\gamma `$ scattering, be used to measure the gluon distribution in the photon. Recently studies of di-jet events in $`\gamma \gamma `$ interactions at LEP bib-djopold ; bib-twichep  and $`\gamma \mathrm{p}`$ photoproduction interactions at HERA bib-hera  have shown a direct sensitivity to the gluon distribution in the photon.

In this paper a study is presented of di-jet cross sections at a photon collider (PC), and the sensitivity to the structure of the photon is investigated. The results are compared with expectations for a linear $`\mathrm{e}^+\mathrm{e}^{}`$ collider.

## 2 Monte Carlo Study

The study is made with the Monte Carlo Generator program PHOJET (version 1.12) bib-phojet  which contains all leading order (LO) diagrams complemented by parton showers to emulate higher order contributions. Hadronization of the parton final state is provided by the JETSET bib-pythia  program. The transverse energy of the jets provides a hard scale which regularizes perturbative QCD calculations. Jets are reconstructed using the inclusive $`k_{}`$ clustering algorithm as proposed in bib-ktclus . In this algorithm the distance measure between any pair of objects $`\{i,j\}`$ to be clustered is taken to be $`d_{ij}=\mathrm{min}(E_{T,i}^2,E_{T,j}^2)\left(R_{i,j}^2/R_0^2\right)`$ with $`R_{i,j}^2=\left(\mathrm{\Delta }\eta _{ij}\right)^2+\left(\mathrm{\Delta }\varphi _{ij}\right)^2`$. Throughout this analysis we set $`R_0^2=1`$. $`E_{T,i}`$, $`\eta _i`$, and $`\varphi _i`$ are the transverse energy, pseudorapidity, and azimuthal angle of the $`i`$-th object in the laboratory center-of-mass system. The transverse energy $`E_{\mathrm{T}_i}`$ of an object $`i`$ is defined relative to the $`z`$ axis of the detector. The clustering starts from the smallest value $`d_{\mathrm{min}}`$ of the combined set of all $`d_{ij}`$ and all $`d_i=E_{T,i}^2`$. If $`d_{\mathrm{min}}`$ belongs to the subset $`d_{ij}`$, the two objects $`i`$ and $`j`$ are merged into a new object using the $`E_T`$ recombination scheme. In this scheme the properties of the merged particle are computed as $`E_T^{}=E_{T,i}+E_{T,j}`$, $`\eta ^{}=\left(E_{T,i}\eta _i+E_{T,j}\eta _j\right)/E_T^{}`$, and $`\varphi ^{}=\left(E_{T,i}\varphi _i+E_{T,j}\varphi _j\right)/E_T^{}`$. If $`d_{\mathrm{min}}`$ belongs to the subset $`d_i`$, the object is added to the list of jets and removed from the clustering list. The procedure is finished when no objects are left in the clustering list.

Realistic detector cuts, imposed by the TESLA detector study group bib-tesladet  are applied in the Monte Carlo study. Unless otherwise specified jets are required to have a pseudorapidity $`\eta `$ in the range $`|\eta |<2.5`$.

The kinematics of the two jets is used to estimate the fraction of the photon momentum participating in the interaction, $`x_\gamma `$, which is a sensitive probe of the structure of the photon. A variable, defined at the hadronic final state, is

$$x_\gamma ^\pm =\frac{\mathrm{\Sigma }_{jets}(E\pm p_z)}{\mathrm{\Sigma }_{hadrons}(E\pm p_z)}$$

and is closely related to the true partonic $`x_\gamma `$ variable. Here $`E`$ and $`p_z`$ denote the energy and longitudinal momentum respectively. Direct processes are characterized by having a $`x_\gamma `$ value close to one.

A linear $`\mathrm{e}^+\mathrm{e}^{}`$collider with a CMS energy of 500 GeV is assumed. The expected luminosity of TESLA is 200 fb<sup>-1</sup>/year, and for the photon collider about 10 times lower (for the high energy part of the photon spectrum).

## 3 Results

Fig. 2 shows the di-jet cross section for a photon collider, as a function of $`E_T`$ of the jets and the average $`\eta `$ of the jet pair. The $`x_\gamma `$ distribution is shown as function of minimum $`E_T`$ thresholds for the jets (each event gives two entries: $`x_{\gamma }^{}{}_{}{}^{+}`$ and $`x_{\gamma }^{}{}_{}{}^{}`$). E.g. the entry 5/3 GeV means that the first jet has an $`E_T`$ above 5 GeV, while the second jet has an $`E_T`$ above 3 GeV. Clearly lower thresholds allow to reach lowest $`x_\gamma `$ values, which are of particular interest. In this region the gluon induced processes are anticipated to dominate, and moreover a strong rise of the gluon density is predicted at small $`x`$ from models mirrored to the evolution dynamics of proton parton densities. For the photon such a rise at small $`x`$ has not been unambiguously observed yet. The proposed measurements reach an order of magnitude further down in $`x_\gamma `$ compared to current measurements from jets at LEP and HERA bib-djopold ; bib-twichep ; bib-hera .

It is important to note that also for the highest $`E_T`$ cuts studied there is still a good sensitivity to parton densities at low $`x`$. The final choice of the $`E_T`$ thresholds will depend on the acceptance and background conditions and on the control of theoretical uncertainties, such as underlying event effects, which may spoil the extraction of the gluon distribution from the data. Generally the cuts are expected to be in the range given in this figure. The cross sections for all threshold combinations are large, hence the measurement of these processes will be systematics dominated. Unless stated differently, the results below are for the (5/3) GeV threshold pair, which is presently used in jet studies at LEP.

Fig.3(a,b) shows the effect from the restricted $`\eta `$ range for jet measurements in a future detector on the low-$`x`$ reach of $`x_\gamma `$. The effect is large, and better $`\eta `$ coverage will allow to reach smaller values in $`x_\gamma `$.

Fig.3(c,d) show the sensitivity of the cross section as a function of $`x_\gamma `$ to two different parton distributions for the photon, GRV LO bib-grv  and SAS 1D bib-sas , which are both consistent with present day measurements of the photon structure. At low $`x`$ the differences in cross section are as large as a factor two, well within the sensitivity expected of the measurement.

In Fig.4(a,b) the contribution of gluon induced processes, compared to all processes, is shown for (7/5) GeV $`E_T`$ thresholds. A small smeared peak from direct contributions is seen close to $`x_\gamma `$ =1. However in most of the region the processes are dominated by parton scattering involving gluons, and thus sensitive to the gluon distribution in the photon. At small $`x_\gamma `$ the gluon contribution amounts to 90%.

Fig. 4(c,d) shows the same distributions but for an $`\mathrm{e}^+\mathrm{e}^{}`$ collider, where two photon interactions result from photons emitted from the beam leptons described by a Weizäcker-Williams energy distribution. Hence the energy of the photons is in general much smaller than that of the photons from a photon collider, based on the same $`\mathrm{e}^+\mathrm{e}^{}`$ machine. The cross sections at an $`\mathrm{e}^+\mathrm{e}^{}`$ collider are much smaller, thus loosing the benefit of a higher luminosity. Furthermore, the quark induced processes have relative larger contributions at an $`\mathrm{e}^+\mathrm{e}^{}`$ collider, blurring the extraction of the gluon distribution from the jet measurement much more than in the photon collider case.

## 4 Summary

Di-jet production at a future photon collider has been studied, including restrictions imposed by a possible detector, and discussed in terms of the $`x_\gamma `$ variable which is a measure of the hadronic structure of the photon. With presently anticipated experimental restrictions, values of $`x_\gamma `$ down to a few times $`10^3`$ can be reached. At low $`x_\gamma `$ the cross section is predicted to be dominated by the gluon content of the photon, and can thus be used to extract the gluon distribution. The photon collider has several advantages, such as large cross sections and better dominance of gluon induced processes, over a $`\mathrm{e}^+\mathrm{e}^{}`$ collider.


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# Predicting and generating time series by neural networks: An investigation using statistical physics

## 1 Introduction

In the last two decades there has been intensive research on the statistical physics of neural networks Hertz:NeuralComp ; Engel:00 ; Kinzel:Rev . The cooperative behaviour of neurons interacting by synaptic couplings has been investigated using mathematical models which describe the activity of each neuron as well as the strength of the synapses by real numbers. Simple mechanisms change the activity of each neuron receiving signals via the synapses from many other ones, and change the strength of each synapse according to presented examples on which the network is trained.

In the limit of infinitely large networks and for a set of random examples there exist mathematical tools to calculate properties of the system of interacting neurons and synapses exactly. For many models the dynamics of the network receiving continuously new examples has been described by nonlinear ordinary differential equations for a few order parameters describing the state of the system BiehlC . If a network is trained on the total set of examples, the stationary state has been described by a minimum of a cost function. Using methods of the statistical mechanics of disordered systems (spin glasses), the properties of the network can be described by nonlinear equations of a few order parameters.

It turns out that already very simple models of neural networks have interesting properties with respect to information processing. A network with $`N`$ neurons and $`N^2`$ synapses can store a set of order $`N`$ patterns simultaneously. Such a network functions as a content–addressable, distributed and associative memory.

Already a simple feedforward network with only one layer of synaptic weights can learn to classify high dimensional data. When such a network (=”student”) is trained on examples which are generated by a different network (=”teacher”), then the student achieves overlap to the teacher network. This means that the student has not only learned the training data but it also can classify unknown input data to some extent - it generalizes. Using statistical mechanics, the generalization error has been calculated exactly as a function of the number of examples for many different scenarios and network architectures Opper:Generalization .

An important application of neural networks is the prediction of time series. There are many situations where a sequence of numbers is measured and one would like to know the following numbers without knowing the rule which produces these numbers Weigand . There are powerful linear prediction algorithms including assumptions on external noise on the data, but neural networks have proven to be competitive algorithms compared to other known methods.

Since 1995 the statistical physics of time series prediction has been studied Eisenstein:BG . Similar to the static case, the series is generated by a well known rule - usually a different ”teacher”–network - and the student network is trained on these data while moving it over the series. We are interested in the following questions:

1. How well can the student network predict the numbers of the series after it has been trained on part of it?
2. Has the student network achieved some knowledge about the rule (=network) which produced the time series?

It seems to be straightforward to extend the analytic methods and results of the static classification problem to the case of time series prediction. The only difference seems to be the correlation between input vector and output bit. However, although many experts in this field looked into this problem, neither the capacity problem nor the prediction problem could be solved analytically up to now, even for the simple perceptron. Furthermore, it turned out that already the problem of the generation of a time series by a neural network is not trivial. A network can produce quasiperiodic or chaotic sequences, depending on the weights and transfer functions. For some models an analytic solution has been derived, even for multilayer networks Kanter:Analytical .

In this talk I intend to give an overview over the statistical physics of neural networks which generate and predict time series. Firstly, I discuss the capacity problem: Given a random sequence, what is the maximal length a perceptron can learn perfectly? Secondly, in Section 3 a network generating binary or continuous sequences is introduced and analysed. Thirdly, the prediction of quasiperiodic and chaotic sequences is investigated in Section 4. In Section 5 it is shown that for any prediction algorithm a sequence can be constructed for which this algorithm completely fails. Section 6 considers the problem of a set of neural networks which learn from each other. This scenario is applied to a simple economic model, the minority game. Finally, in Section 8 it is shown that a simple perceptron can be trained to predict a sequence of bits entered by the reader, even if he/she tries to generate random bits.

## 2 Learning from random sequences

A neural network learns from examples. In the case of time series prediction the examples are defined by moving the network over the sequence, as shown in Fig.1.

Let us consider the simplest possible neural network, the perceptron. It consists of an $`N`$–dimensional weight vector $`\underset{¯}{w}=(w_1,\mathrm{},w_N)`$ and a transfer function $`\sigma =f\left(\frac{1}{N}\underset{¯}{w}\underset{¯}{S}\right)`$. $`\underset{¯}{S}`$ is the input vector, given by the sequence. We mainly consider two transfer functions, the Boolean and the continuous perceptron:

$`\sigma `$ $`=`$ $`\text{sign}(\underset{¯}{w}\underset{¯}{S});`$ (1)
$`\sigma `$ $`=`$ $`\mathrm{tanh}\left({\displaystyle \frac{\beta }{N}}\underset{¯}{w}\underset{¯}{S}\right).`$ (2)
$`\beta `$ is a parameter giving the slope of the linear part of the transfer function in the continuous case, $`f(x)\beta x+O(x^3)`$.

The aim of our network is to learn a given sequence $`S_0,S_1,S_2,\mathrm{}`$. This means that the network should find - by some simple algorithms - a weight vector $`\underset{¯}{w}`$ with the property

$$S_t=f\left(\frac{1}{N}\underset{j=1}{\overset{N}{}}w_jS_{tj}\right)$$
(3)
for all time steps $`t`$. For the Boolean function Eq.(1) this set of equations becomes a set of inequalities

$$S_t\underset{j=1}{\overset{N}{}}w_jS_{tj}>0$$
(4)
for all $`t`$. If the bits $`S_t`$ in Eq.(4) are random, $`S_t\{+1,1\}`$, instead of taken from the time series then the inequalities (4) have a solution if the number of inequalities is smaller than $`2N`$ (with probability one in the limit $`N\mathrm{}`$). This is the famous result which was found by Schläfli in about 1850 and was calculated using replica theory by Gardner 140 years later Schlaeffli:1850 ; Gardner:89 .

What happens if the bits $`S_t`$ are not independent but taken from a random time series? Let us assume that we arrange $`P=\alpha N`$ bits $`S_t`$ on a ring or, equivalently, look at $`P`$ random bits periodically repeated. For this case we ask the question: How long is the typical sequence which a Boolean perceptron can learn perfectly?

Up to now there is no analytical solution of Eq.(4) for this scenario, although several experts in this field have tried to solve this problem. However, detailed numerical simulations show that it is harder to learn a random sequence than random patterns: the maximal length of the sequence is $`P/N=\alpha _c1.7`$ Schroeder:Capacity , which should be compared with $`\alpha _c=2`$ for random patterns. Obviously tiny correlations between input vectors and output bits make the problem harder to learn for a perceptron.

## 3 Generating sequences

In the previous section the perceptron learned a short random sequence exactly. Consequently it also can predict it, without errors. If a neural network is able to predict a given time series it can also generate the same series. Generating means, according to Fig.1, the network takes the last $`N`$ numbers of the sequence, calculates a new number and moves one step to the right. Repeating this procedure generates a sequence $`S_0,S_1,S_2\mathrm{}`$ given by Eq.(3).

Therefore it is interesting to study the structure of sequences generated by a neural network. Here we discuss the case of fixed weights $`\underset{¯}{w}`$, only. Adaptive weights are considered in sections 5 to 8.

Numerical simulations show that for random weights $`\underset{¯}{w}`$ and random initial states $`\underset{¯}{S}`$ the sequence has a transient initial part and finally runs into a one of several possible cycles. The structure of these cycles is related to the maxima of the Fourier spectrum of the weights $`w_1,\mathrm{},w_N`$. Hence it is important to understand the sequence generated by a single Fourier component

$$w_j=\mathrm{cos}\left(2\pi K\frac{j}{N}+\pi \varphi \right).$$
(5)
$`K`$ is an integer frequency and $`\varphi [1,1]`$ a phase of the weight vector. For a continuous perceptron we are looking for a solution $`S_0,S_1\mathrm{}`$ of an infinite number of equations

$$S_t=\mathrm{tanh}\left[\frac{\beta }{N}\underset{j=1}{\overset{N}{}}\mathrm{cos}\left(2\pi K\frac{j}{N}\pi \varphi \right)S_{tj}\right].$$
(6)
For this case an analytic solution could be derived Kanter:Analytical . For small values of $`\beta `$ the attractor is zero, the sequence relaxes to $`S_t=0`$. However, above a critical value of $`\beta `$ which is independent of the frequency $`K`$, a nonzero attractor exists; close to $`\beta _c`$ it is given by

$$S_t=\mathrm{tanh}\left[A(\beta )\mathrm{cos}\left(2\pi (K+\varphi )\frac{t}{N}\right)\right].$$
(7)
The amplitude $`A(\beta )`$ increases continuously from zero above a critical value

$$\beta >\beta _c=2\frac{\pi \varphi }{\mathrm{sin}(\pi \varphi )}.$$
(8)
Therefore, the attractor of the sequence is a quasiperiodic cycle with a frequency $`K+\varphi `$. The phase $`\varphi `$ of the weights shifts the frequency of the sequence - a result which is not easy to understand without calculating it.

For a multilayer network the situation is similar: Each hidden unit can contribute a quasiperiodic component to the sequence, which has its own critical point. Increasing $`\beta `$, more and more components are activated. This is shown in Fig.2 for a network with two hidden units: For small values of the parameter $`\beta `$ the quasiperiodic attractor is one–dimensional, for large $`\beta `$ both compoments are activated yielding a two–dimensional attractor as shown by the return map $`S_{t+1}(S_t)`$. The attractor dimension is limited by the number of hidden units Kanter:AttrDim .

If the transfer function is discrete, Eq.(1), the situation is more complex Eisenstein:BG ; Schroeder:Cycles  In this case we obtain a bit generator whose cycle length is limited by $`2^N`$. However, numerical simulations show that the spectrum of cycle lengths has a much lower bound, namely the value $`2N`$, at least for single component weights with $`|\varphi |<1/2`$. After a transient part the bit sequence $`S_t`$ follows the equation

$$S_t=\text{sign}\left[\mathrm{cos}\left(2\pi (K+\varphi )\right)\frac{t}{N}\right].$$
(9)
But the sequence cannot follow this equation forever; namely if a window $`(S_{t1},\mathrm{},S_{tN})`$ appeares a second time, the perceptron has to repeat the sequence. Numerical calculations show that Eq.(9), in addition to this condition, produces cycles shorter than $`2N`$. It remains a challenge to show this result analytically.

Fig.3 shows the cycle length $`L(\varphi )`$ of the bit generator with weights (5). This rather complex figure has a simple origin, it just shows the properties of rational numbers. An integer multiple of the wavelength $`\lambda `$ given by (9)

$$\lambda =\frac{N}{K+\varphi }$$
(10)
has to fit into the cycle

$$L=n\lambda .$$
(11)
Hence $`\lambda `$ has to be a rational. The pattern $`L(\varphi )`$ shown in Fig.3 turns out to be the numerator as a function of its rational basis. However, this does not explain why this picture is cut for $`L>2N`$.

Up to now we have discussed quasiperiodic sequences, only. But time series occurring in applications are in general more complex. Therefore we are interested in the question: Can a neural network generate a time series with a more complex power spectrum than a single peak and its higher harmonics?

It turns out that a multilayer network cannot generate a sequence with an arbitrary power spectrum. To generate a sequence with autocorrelations which decay as a power law, one needs a fully connected asymmetric network, a more complex architecture than a feedforward network Priel:Correlated .

However, a simple perceptron can generate a chaotic sequence. When the weights have a bias,

$$b=\frac{1}{N}\underset{i}{}w_i>0,$$
(12)
then there are tiny regions in the $`(\beta ,b)`$–plane where a chaotic sequence has been observed numerically Priel:Long-term . Such a scenario has been called fragile chaos. The fractional dimension of such a chaotic sequence is between one and two, and in the vicinity of chaotic parameters $`(\beta ,b)`$ there is always a parameter set with a quasiperiodic sequence.

This situation is different for a nonmonotonic transfer function. If the function $`\mathrm{tanh}(x)`$ in (2) is replaced by $`\mathrm{sin}(x)`$ there are large compact regions in the parameter space where the sequence is chaotic with a large fractal dimension of the order of $`N`$. Neural networks with nonmonotonic transfer functions yield high dimensional stable chaos Priel:Long-term ; Priel:Robust . In this case the attractor dimension can be tuned by the parameter $`\beta `$ between the values one and $`N`$.

## 4 Prediciting time series

If a neural network cannot generate a given sequence of numbers, it cannot predict it with zero error. But this is not the whole story. Even if the sequence has been generated by an (unknown) neural network (the teacher), a different network (the student) can try to learn and to predict this sequence. In this context we are interested in two questions:

1. When a student network with the identical architecture as the teacher one is trained on the sequence, how does the overlap between student and teacher develop with the number of training examples (= windows of the sequence)?
2. After the student network has been trained on a part of the sequence how well can it predict the sequence several steps ahead?

Recently these questions have been investigated numerically for the simple perceptron Freking . We have to distinguish several scenarios:

1. Boolean versus continuous perceptron
2. On–line versus batch learning
3. Quasiperiodic versus chaotic sequence.

In all cases we consider only the stationary part of a sequence which was generated by a perceptron. The student network is trained on the stationary part only, not on the transient.

First we discuss the Boolean perceptron of size $`N`$ which has generated a bit cycle with a typical length $`L<2N`$. The teacher perceptron has random weights with zero bias, and the cycle is related to one component of the power spectrum of the weights. The student network is trained using the perceptron learning rule:

$`\mathrm{\Delta }w_i`$ $`={\displaystyle \frac{1}{N}}S_tS_{ti}`$ $`\text{if}S_t{\displaystyle \underset{j=1}{\overset{N}{}}}w_jS_{tj}<0;`$ (13)
$`\mathrm{\Delta }w_i`$ $`=0\text{ else}.`$ (14)
For this algorithm there exists a mathematical theorem Hertz:NeuralComp : If the set of examples can be generated by some perceptron then this algorithm stops, i.e. it finds one out of possibly many solutions. Since we consider examples from a bit sequence generated by a perceptron, this algorithm is guaranteed to learn the sequence perfectly. On–line and batch training are identical, in this case.

The network is trained on the cycle until the training error is zero. Hence the student network can predict the stationary sequence perfectly. Surprisingly, it turns out that the overlap between student and teacher is small, in fact it is zero for infinitely large networks, $`N\mathrm{}`$. The network learns the projection of the teacher’s weight vector onto the sequence, but not the complete vector. It behaves like a filter selecting one of the components of the power spectrum of the weights. Although it predicts the sequence perfectly, it does not gain much information on the rule which generates this sequence.

This situation seems to be different in the case of a continuous perceptron. Inverting Eq.(3) for a monotonic transfer function $`f(x)`$ gives $`N`$ linear equations for $`N`$ unknowns $`w_i`$. If the stationary part of the sequence is either quasiperiodic or chaotic, all patterns are different and the batch training, using $`N`$ windows, leads to perfect learning.

This holds true for a chaotic time series. However, for a quasiperiodic one (Eq.(7)) the patterns are almost linearly dependent, yielding an ill–conditioned set of linear equations. Without the $`\mathrm{tanh}(x)`$ in Eq.(7), one would obtain a two–dimensional space of patterns; with the nonlinearity one obtains small contributions in the other $`N2`$ dimensions of the weight space. Nevertheless, depending on the parameter $`\beta `$, even professional computer routines sometimes do not succeed in solving Eq.(3) for quasiperiodic patterns generated by a teacher perceptron.

How does this scenario show up in an on–line training algorithm for a continuous perceptron? If a quasiperiodic sequence is learned step by step without iterating previous steps, using gradient descent to update the weights,

$$\mathrm{\Delta }w_i=\frac{\eta }{N}(S_tf(h))f^{}(h)S_{ti}\text{with}h=\beta \underset{j=1}{\overset{N}{}}w_jS_{tj}$$
(15)
then one can distinguish two time scales (time = number of training steps):

1. A fast one increasing the overlap between teacher and student to a value which is still far away from the value one which corresponds to perfect agreement.
2. A slow one increasing the overlap very slowly. Numerical simulations for millions times $`N`$ training steps yielded an overlap which was still far away from the value one.

Although there is a mathematical theorem on stochastic optimization which seems to guarantee convergence to perfect success StochOpt , our on–line algorithm cannot gain much information about the teacher network. It would be interesting to know how these two time scales depend on the size of the system. In addition we cannot exclude that there exist on-line algorithms which can learn our ill-conditioned problem in short times.

This is completely different for a chaotic time series generated by a corresponding teacher network with $`f(x)=sin(x)`$. It turns out that the chaotic series appears like a random one: After a number of training steps of the order of $`N`$ the overlap relaxes exponentially fast to perfect agreement between teacher and student.

Hence, after training the perceptron with a number of examples of the order of $`N`$ we obtain the two cases: For a quasiperiodic sequence the student has not obtained much information about the teacher, while for a chaotic sequence the student’s weight vector comes close to the one of the teacher. One important question remains: How well can the student predict the time series?

Fig.4 shows the prediction error as a function of the time interval over which the student makes the predictions. The student network which has been trained on the quasiperiodic sequence can predict it very well. The error increases linearly with the size of the interval, even predicting $`10N`$ steps ahead yields an error of about 10% of the total possible range. On the other side, the student trained on the chaotic sequence cannot make predictions. The prediction error increases exponentially with time; already after a few steps the error corresponds to random guessing, $`ϵ1`$.

In summary we obtain the surprising result:

1. A network trained on a quasiperodic sequence does not obtain much information about the teacher network which generated the sequence. But the network can predict this sequence over many (of the order of $`N`$) steps ahead.
2. A network trained on a chaotic sequence obtains almost complete knowledge about the teacher network. But this network cannot make reasonable predictions on the sequence.

It would be interesting to find out whether this result also holds for other prediction algorithms, such as multilayer networks.

## 5 Predicting with 100% error

Consider some arbitrary prediction algorithm. It may contain all the knowledge of mankind, many experts may have developed it. Now there is a bit sequence $`S_1,S_2\mathrm{}`$ and the algorithm has been trained on the first $`t`$ bits $`S_1,\mathrm{},S_t`$. Can it predict the next bit $`S_{t+1}`$? Is the prediction error, averaged over a large $`t`$ interval, less than 50%?

If the bit sequence is random then every algorithm will give a prediction error of 50%. But if there are some correlations in the sequence then a clever algorithm should be able to reduce this error. In fact, for the most powerful algorithm one is tempted to say that for any sequence it should perform better than 50% error. However, this is not true Zhu:Antipred . To see this just generate a sequence $`S_1,S_2,S_3,\mathrm{}`$ using the following algorithm:

Define $`S_{t+i}`$ to be the opposite of the prediction of the algorithm which has been trained on $`S_1,\mathrm{},S_t`$ .

Now, if the same algorithm is trained on this sequence, it will always predict the following bit with 100% error. Hence there is no general prediction machine; to be successful for a class of problems the algorithm needs some preknowledge about it.

The Boolean perceptron is a very simple prediction algorithm for a bit sequence, in particular with the on–line training algorithm (13). How does the bit sequence look like for which the perceptron completely fails?

Following (13) we just have to take the negative value

$$S_t=\text{sign}\left(\underset{j=1}{\overset{N}{}}w_jS_{tj}\right)$$
(16)
and then train the network on this new bit

$$\mathrm{\Delta }w_j=+\frac{1}{N}S_tS_{tj}.$$
(17)
The perceptron is trained on the opposite (= negative) of its own prediction. Starting from (say) random initial states $`S_1,\mathrm{},S_N`$ and weights $`\underset{¯}{w}`$, this procedure generates a sequence of bits $`S_1,S_2,\mathrm{}S_t,\mathrm{}`$ and of vectors $`\underset{¯}{w},\underset{¯}{w}(1),\underset{¯}{w}(2),\mathrm{}\underset{¯}{w}(t),\mathrm{}`$ as well. Given this sequence and the same initial state, the perceptron which is trained on it yields a prediction error of 100%.

It turns out that this simple algorithm produces a rather complex bit sequence which comes close to a random one. After a transient time the weight vector $`\underset{¯}{w}(t)`$ performs a kind of random walk on a $`N`$–dimensional hypersphere. The bit sequence runs to a cycle whose average length $`L`$ scales exponentially with $`N`$,

$$L2.2^N.$$
(18)
The autocorrelation function of the sequence shows complex properties: It is close to zero up to $`N`$, oscillates between $`N`$ and $`3N`$ and it is similar to random noise for larger distances. Its entropy is smaller than the one of a random sequence since the frequency of some patterns is suppressed. Of course, it is not random since the prediction error is 100% instead of 50% for a random bit sequence.

When a second perceptron (=student) with different initial state $`\underset{¯}{w}`$ is trained on such an antipredictable sequence generated by Eq.(13) it can perform somewhat better than the teacher: The prediction error goes down to about 78% but it is still larger than 50% for random guessing. However, the student obtains knowledge about the teacher: The angle between the two weight vectors relaxes to about 45 degrees.

## 6 Learning from each other

In the previous section we have discussed a neural network which learns from itself. But more interesting may be the scenario where several networks are interacting, learning from each other. After all, our living world consists of interacting adaptive systems and recent methods of computer science use interacting agents to solve complex problems. Here we consider a simple system of interacting perceptrons as a first example to develop a theory of cooperative behaviour of adaptive agents.

Consider $`K`$ Boolean perceptrons, each of which has an $`N`$–dimensional weight vector $`\underset{¯}{w}^\nu ,\nu =1,\mathrm{},K`$. Each perceptron is receiving the same input vector $`S_1,\mathrm{},S_N`$ and produces its own output bit

$$\sigma ^\nu =\text{sign}(\underset{¯}{w}^\nu \underset{¯}{S})$$
(19)
Now these networks receive information from their neighbours in a ring–like topology: Perceptron $`\underset{¯}{w}^\nu `$ is trained on the output $`\sigma ^{\nu 1}`$ of perceptron $`\underset{¯}{w}^{\nu 1}`$, and $`\underset{¯}{w}^1`$ is trained on $`\sigma ^K`$. Training is performed keeping the length of the weight vectors fixed:

$$\underset{¯}{w}^\nu (t+1)=\frac{\underset{¯}{w}^\nu (t)+(\eta /N)\sigma ^{\nu 1}\underset{¯}{S}}{|\underset{¯}{w}^\nu (t)+(\eta /N)\sigma ^{\nu 1}\underset{¯}{S}|}$$
(20)
The learning rate $`\eta `$ is a parameter controlling the speed of learning.

This problem has been solved analytically in the limit $`N\mathrm{}`$ Metzler:Interact  for random inputs. The system relaxes to a stationary state, where the angles $`\theta _{\nu \mu }`$ (or overlaps) between different agents take a fixed value. For small learning rate $`\eta `$ all of these angles are small, i.e. there is good agreement between the agents. But more surprising: The state of the system is completely symmetric, there is only one common angle $`\theta =\theta _{\nu \mu }`$ between all pairs of networks. The agents do not recognize the clockwise flow of information.

Increasing the lerning rate $`\eta `$ the common angle $`\theta `$ increases, too. With larger learning steps each agent tends to have an opinion opposite to all of its colleagues. But, due to the symmetry, there is maximal possible angle given by

$$\mathrm{cos}\theta =\frac{1}{K1}.$$
(21)
In fact, increasing $`\eta `$ the system arrives at this maximal angle at some critical value $`\eta _c`$. For larger value of $`\eta >\eta _c`$ the system undergoes a phase transition: The complete symmetry is broken, but the symmetry of the ring is still conserved:

$$\theta _1=\theta _{\nu +1,\nu },\theta _2=\theta _{\nu +2,\nu },\mathrm{}$$

For $`K`$ agents there are $`(K1)/2`$ values of $`\theta _i`$ possible if $`K`$ is odd, and $`K/21`$ values for even $`K`$.

This is a simple - but analytically solvable - example of a system of interacting neural networks. We observe a symmetry breaking transition when increasing the learning rate. However, this system does not solve any problem. In the following section we will extend this scenario to a case where indeed neural networks interact to solve a special problem, the minority game.

## 7 Competing in the minority game

Recently a mathematical model of economy receives a lot of attention in the community of statistical physics Econophys . It is a simple model of a closed market: There are $`K`$ agents who have to make a binary decision $`\sigma ^\nu \{+1,1\}`$ at each time step. All of the agents who belong to the minority gain one point, the majority has to pay one point (to a cashier which always wins). The global loss is given by

$$G=\left|\underset{\nu =1}{\overset{K}{}}\sigma ^\nu \right|$$
(22)
If the agents come to an agreement before they make a new decision, it is easy to minimize $`G:(K1)/2`$ agents have to choose $`+1`$, then $`G=1`$. However, this is not the rule of the game, the agents are not allowed to cooperate. Each agent knows only the history of the minority decision, $`S_1,S_2,S_3,\mathrm{}`$, but otherwise he/she has no information. Can the agent find an algorithm to maximize his/her profit?

If each agent makes a random decision, then $`G`$ is of the order of $`\sqrt{K}`$. It is not easy to find algorithms which perform better than random Challet:Theory ; Reents:Stochastic .

Here we use a perceptron for each agent to make a decision based on the past $`N`$ steps $`\underset{¯}{S}=(S_{tN},\mathrm{},S_{t1})`$ of the minority decision. The decision of agent $`\underset{¯}{w}^\nu `$ is given by

$$\sigma ^\nu =\text{sign}(\underset{¯}{w}^\nu \underset{¯}{S}).$$
(23)
After the bit $`S_t`$ of the minority has been determined, each perceptron is trained on this new example $`(\underset{¯}{S},S_t)`$,

$$\mathrm{\Delta }\underset{¯}{w}^\nu =\frac{\eta }{N}S_t\underset{¯}{S}.$$
(24)
This problem could be solved analytically Metzler:Interact . The average global loss for $`\eta 0`$ is given by

$$G^2=(12/\pi )K0.363K.$$
(25)
Hence, for small enough learning rates the system of interacting neural networks performs better than random decisions. A pool of adaptive perceptrons can organize itself to yield a successful cooperation.

## 8 Predicting human beings

As a final example of a perceptron predicting a bit sequence we discuss a real application. Assume that the bit sequence $`S_0,S_1,S_2,\mathrm{}`$ is produced by a human being. Now a simple perceptron (1) with on–line learning (13) takes the last $`N`$ bits and makes a prediction for the next bit. Then the network is trained on the new true bit, which afterwards appears as part of the input for the following prediction.

Eq.(13) is a simple deterministic equation describing the change of weights according to the new bit and the past $`N`$ bits. Can such a simple equation foresee the reaction of a human being? On the other side, if a person can calculate or estimate the outcome of Eq. (13), then he/she can just do the opposite, and the network completely fails to predict.

To answer these questions we have written a little C program which receives the two bits 0 and 1 from the keyboard KR:98 . The program needs two fields neuron and weight which contain the variable $`S_i`$ and $`w_i`$, respectively. Here are the main steps:

1. Repeat:
while (1) {
2. Calculate the vector product $`\underset{¯}{w}\underset{¯}{S}`$:
for (h=0; i=0; i\<N; i++) h+=weight\[i\]\*neuron\[i\];
3. Read a new bit:
if(getchar()==’1’) input=1; else input =-1;
4. Calculate the prediction error:
if(h\*input\<0) {error ++;
5. Train:
for(i=0; i\<N; i++) weight\[i\]+=input\* neuron\[i\]/(double)N;}
6. Shift the input window:
for(i=N-1; i\>0; i--) neuron\[i\]=neuron\[i-1\]; neuron =input; }

A graphical version of this program can be accessed over the internet:

http://theorie.physik.uni-wuerzburg.de/~kinzel

Now we ask a person to generate a bit sequence for which the prediction error of the network is high. We already know from section 2 what happens if the candidate produces a rhythm: if its length is smaller than $`1.7N`$ the perceptron can learn it perfectly, without errors. Hence the candidate should either produce random numbers which give 50% errors or he/she should try to calculate the prediction of the perceptron, in this case an error higher than 50% is possible.

We have tested this program on students of our class. Each student had to send a file with one thousand bits, generated by hand. It turns out that on average the network predicts with an error of about 35%. The distribution of errors is broad with a range between 20% and 50%. Apparently, a human being is not a good random number generator. The simple perceptron (1) and (13) succeeds in predicting human behaviour!

Some students submitted sequences with 50% error. It was obvious - and later confessed - that they used random number generators, digits of $`\pi `$, the logistic map, etc. instead of their own fingers. One student submitted a sequence with 100% error. He was the supervisor of our computer system, knew the program and submitted the sequence described in section 5.

## 9 Summary

The theory of time series generation and prediction is a new field of statistical physics. The properties of perceptrons, simple single–layer neural networks being trained on sequences which were produced by other perceptrons, have been studied. A random bit sequence is more difficult to learn perfectly than random uncorrelated patterns. An analytic solution of this capacity problem is still missing.

A multilayer network can be used to generate time series. For the continuous transfer function an analytic solution of the stationary part of the sequence has been found. The sequence has a dimension which is bounded by the number of hidden units. It is not completely clear yet how to extend this solution to the case of a Boolean perceptron generating a bit sequence. For nonmonotonic transfer functions the network generates a chaotic sequence with a large fractal dimension.

A perceptron which is trained on a quasiperiodic sequence can predict it very well, but it does not obtain much information on the rule generating the sequence. On the other side, for a chaotic sequence the overlap between student and teacher is almost perfect, but prediction of the sequence is not possible.

For any prediction algorithm there is a sequence for which it completely fails. For a simple perceptron such a sequence is rather complex, with huge cycles and low autocorrelations. Another perceptron which is trained on such a sequence reduces the prediction error from 100% to 78% and obtains overlap to the generating network.

When perceptrons learn from each other, the system relaxes to a symmetric state. Above a critical learning rate there is a phase transition to a state with lower symmetry.

A system of interacting neural network can develop algorithms for the minority game, a model of a closed economy of competing agents.

Finally it has been demonstrated that human beings are not good random number generators. Even a simple perceptron can predict the bits typed by hand with an error of less than 50%.

Acknowledgement:

The author appreciates comments of Ido Kanter, Richard Metzler, Ansgar Freking and Michael Biehl.