He lives in Scarsdale, New York. He invented the field of fractal geometry, and is probably most notable for the Mandelbrot set, which yields incredibly intricate and beautiful fractal designs. The House of Modern Finance. Buffett, the famously successful investor and industrialist, jested that he would like to fund university chairs in the Efficient Market Hypothesis, so that the professors would train even more misguided financiers whose money he could win. Prices don't vary like the flips of a coin. Math was the starting point in most of his work.
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The Misbehavior of Markets: A Fractal View of Financial Turbulence | Five Books Expert Reviews
It is enriched by many vivid examples and graphics as well as anecdotes, biting observations and humorous biographical details. Now alter the game: Roland Spinola Trainer und Referent. His earlier book The Fractal Geometry of Nature was a truly groundbreaking book about fractals and how they are seen in nature. View all 3 comments. Furthermore, for a given object, if its "fractal dimension" is greater than its "topographical dimension", then it is, by definition, a fractal.
According to this theory, the market is so efficient that finzncial information is directly reflected in the price of financial assets. Whereas before, whenever I went for a walk and looked up into the sky I would just see chaotic assemblies of clouds and leaf growth, now I am seeing some of the haunting images in this book being expressed by the growth and distribution in nature.
The former a distribution with no finite mean or variance and the latter a phenomenon where correlation is exhibited over long centuries periods of time. Prices tubrulence leap, not glide, which adds to the risk.
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In other words the variance in price movements was greater than economists realized, which means that the chance of ruin for any investor is significantly higher than was generally believed.
Why Stock Markets Crash: Feb 13, Bob Perry rated it it was amazing. He simply offers his ideas, and admits that some don't offer as much insight currently as he wishes. Feb 08, Ivan Idris rated it it was amazing. Thank you for your feedback. What to make of this I can very well see why Taleb considers this as the deepest and most realistic book on finance, since I occasionally felt that I was reading Taleb, not Mandelbrot.
It shakes the foundations of my learning to the core. We are mis-measuring risk. Mandelbrot's work in the area of finance remained, to the time of his death in Octoberpurely descriptive; he never created a model suitable for predicting market behavior. Bubbles develop and burst and individual stocks have market values totally out of line with their assets, revenue and profits. Suppose the direction is uncorrelated with the past: The House of Modern Finance People who helped build the house of modern finance and their theories are mentioned — Markowitz, Sharpe, Black and Scholes.
If someone discovers a sound model of stock prices over time, then it would be by mathematic definition a multifractal model i. 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 Benoit Mandelbrot's The Mis Behavior of Markets is a splendid read and very informative.
However, when it comes to giving practical advice, the book seems on much shakier grounds.
He claims that fractals, especially ones that accounting for trading time that stretch or compress can model price movements in a more accurate way. He doesn't offer any evidence to show that they cannot have done so, and his call at the end shows that he thinks there may be such patterns. Mandelbrot claims that part of this inexplicably erratic behavior is due to the markets having a memory of sorts. There is no question that Mandelbrot proves that cotton price fluctuations are badly described by the normal distribution.
Apr 01, Gumble's Yard rated it really liked it Shelves: He has been writin This is probably the most important and insightful book on the stock market that I've ever read.
Ships from and sold by Amazon. Mandelbrot shows that modern finance has a problem. The first part describes the history leading up to modern finance as still taught in most business schools. Mandelbrot shows that many of these parameters are worse than useless; they oof so wrong, they are dangerous and can lead to world-wide financial ruin.
Yes, markets do go to extremes.
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