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The misbehavior of markets a fractal view of financial turbulence

This trading time speeds up the clock in periods of high volatility, and slows it down in periods of stability. He makes a valid point that I had never thought of before. Please review your cart. His work led to the theory of the efficient market. Only now in the last couple of decades, and I can imagine even more since , has his academic papers found their way into the major producers of economists who pretend to know whats going on.

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Using such concepts, he was able to produce simulated price charts that would have fooled any trader. The Misbehavior of Markets: Aug 10, David rated it really liked it Shelves: But it was academia, and it was pretty harmless bullshit, so let the economists play whatever games they want.

The Misbehavior of Markets : A Fractal View of Financial Turbulence

There is a rich vein of jokes about economists and their assumptions. Still, the idea of chance in markets is difficult to grasp, perhaps because, unlike the anonymous particles in a magnet or molecules in a gas, the millions of people who buy and sell securities are real individuals, complex and familiar.

First, as Markowitz himself pointed out, it is not certain that using the bell curve is the best way to measure stock-market risk; it is easy, but not necessarily right. What many of his followers don't realize is that he has also been watching patterns of market change.

Benoit Mandelbrot is the inventor of the mathematical concept of fractals. The way in which he challenged economists to go back to the drawing board in order to understand the devastating market crashes of and was very influential.

Mandelbrot's thesis is that many common beliefs underpinning market modeling software are fundamentally misbeuavior, and that in using them we are exposing ourselves to massively more risk than we expect. He stands as the most cited author in the book and many of the references by other authors are sources that largely cite him.

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Mandelbrot does a good job of describing the inadequacies of the efficient market hypothesis and CAPM and other sacrosanct theories in finance, and he offers for our consideration an alternative view. But, prompted by Richard MeadowsI got around to reading it. I believe that this mis-modeling is endemic throughout those subjects which can get away without having to provide testable assertions: Withoutabox Submit to Film Festivals.

Travels in the New Third World.

The Misbehavior of Markets : Richard L. Hudson :

It makes unrealistic assumptions. Markets are very, very risky — more risky than the standard theories imagine. Other works by Mandelbrot go much deeper into the "how to" side of fractal finance. Overall I enjoyed the book and learned what's vjew with present theories of finance, but to go beyond that I need to learn the actual math used by Mandelbrot to reach his conclusions.

Sign in with Facebook Sign in options. I reread this book on a semi-annual basis without hesitation. Prices don't vary like the flips of a coin.

The (Mis)Behavior of Markets by Benoît B. Mandelbrot

The Little Book of Talent. He believes markets are 'wildly' random, not 'mildly' random as MPT would have it.

The outcomes are different, and sublimely irrational. In these turbulent economy we seem to be victims of the financial markets.

But his explanation was inconvenient, if it was largely ignored.

Mathematical superstar and inventor of fractal geometry, Benoit Mandelbrot, has spent the past forty years studying the underlying mathematics of space and natural patterns.

But not only is this approach flawed by its reliance on the bell curve, it is also flawed in other ways. Rather than something for advanced-level traders, I think it is the first book for anyone interested in investing or trading.

He defined "fractal dimension" which in simple terms is an exact measure of the vview in detail to the change in scale of a given object.

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