The Misbehavior of Markets

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Review The Misbehavior of Markets: A Fractal View of Financial Turbulence



Benoit Mandelbrot uses years of expertise in mathematics to imagine what the market would look like in a fractal pattern. Mandelbrot, the creator himself of fractal geometry, uses knowledge on natural patterns in closely watching patterns in the movement of the market. Together with Richard Hudson, former editor of the Wall Street Journal and a science journalist, the two develop a revolutionary take on the modern financial theory.

Mandelbrot and Hudson show how the current financial theories downplay potential risks to financial markets by presenting a fractal view of the market movements. This book is an introductory text to the application of fractal patterns to financial theories and market movements. It does not delve much into the exact implementation of the authors’ ideas into trading systems; however, the book provides essential insight into fractal finance. 

The good thing about this book is that even traders or readers who are not mathematically-inclined can still understand the theories and ideas presented. The authors avoid using too many technical jargon and mathematical formulas so as not to intimidate readers away from the book. The book has clear, simple language, that at some points, would become conversational. 

About the Authors

BENOIT MANDELBROT is a mathematician and polymath with various interests in other fields such as practical sciences. He received his master’s degree in aeronautics from the California Institute of Technology and taught courses on economics and applied sciences at Harvard University. He is known to be the inventor of fractal geometry.

RICHARD L. HUDSON served as the managing editor of the European edition of the Wall Street Journal for six years. Previous to that, he worked as a Journal reporter and editor for almost twenty-five years. He graduated from Harvard University in 1978 and became the Knight Fellow of MIT in 1991.

Table of Contents



Prelude: Introducing a Maverick in Science

Part I. The Old Way

Chapter I. Risk, Ruin, and Reward

Chapter II. By the Toss of a Coin or the Flight of an Arrow?

Chapter III. Bachelier and His Legacy

Chapter IV. The House of Modern Finance

Chapter V. The Case Against the Modern Theory of Finance

Pictorial Essay: Images of the Abnormal

Part II. The New Way

Chapter VI. Turbulent Markets: A Preview

Chapter VII. Studies in Roughness: A Fractal Primer

Pictorial Essay: A Fractal Gallery

Chapter VIII. The Mystery of Cotton

Chapter IX. Long Memory, from the Nile to the Marketplace

Chapter X. Noah, Joseph, and Market Bubbles

Chapter XI. The Multifractal Nature of Trading Time

Part III. The Way Ahead

Chapter XII. Ten Heresies of Finance

Chapter XIII. In the Lab