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The (Mis)Behaviour of Markets Summary

5 min read ⌚ 

The (Mis)Behaviour of Markets SummaryA Fractal View of Risk, Ruin, and Reward

Please fasten your seatbelts, because we’re taking off.

Who Should Read “The (Mis)Behaviour of Markets”? And Why?

Some aspects of the book will not be unknown to most financial experts, but even common information is stated interestingly. Mandelbrot’s most crucial financial work was in the 60s. However, his theories about leptokurtosis and fractals have gotten a considerable amount of attention in trading rooms and insignificant colleges.

Along these lines, maybe, it is merely a matter of telling a compelling story, which this book presents Mandelbrot as a lone, clear-thinking prophet battling against a visually impaired and antagonistic economic doctrine.

The authors have spun a fantastic adventure about familiar things, explained in a new way. We recommend “The (Mis)Behaviour of Markets” to finance professionals and business writers and journalists.

About Benoit Mandelbrot & Richard L. Hudson

Benoit MandelbrotBenoit Mandelbrot is a Professor of Mathematical Sciences at Yale University and a Fellow Emeritus at IBM’s Thomas J. Watson Laboratory. He has invented fractal geometry. Richard L. Hudson was a former editor of The Wall Street Journal’s European edition.

“The (Mis)Behaviour of Markets Summary”

Benoit Mandelbrot had a rough childhood. He first tells the story of his father, and how he, as a prisoner in France during the WWII, managed to escape his demise. Mandelbrot also presents how these past situations link to not so distant events, connected to his profession.

To be more precise, his past has made him so intuitive, that he could see relations between things that everyone else saw as unrelated. For example, he could easily compare the floods of the Nile River with the stock-prices on Wall Street.

As a young fellow, Mandelbrot decided to drop out of the elite Ecole Normale Superiore and enlisted into the Ecole Polytechnique. He then continued his education at the California Institute of Technology, at the Massachusetts Institute of Technology and the Institute for Advanced Study in Princeton.

At last, he ended up working at IBM Research. That job was quite atypical for an academic of Mandelbrot’s family. However, that was not the only “atypical” thing he did. Additionally, he took an interest in researching business sectors, the appropriation of wealth, stock markets, bubbles, cotton prices and other monetary phenomena.

An interesting fact about Mandelbrot is that he was anything but conventional. The widely acknowledged doctrine about finance exhibits a pretty much discerning, precise, stable assortment of thought and practice. Mandelbrot’s work debilitated this establishment of the train and proposed what he calls “Ten Heresies of Finance.”

First: Markets are untamed seas, and just like deep waters, they are turbulent: some days, prices do not change, and at different times, they bounce like crazy.

Second: Financial theories are not able to capture the full scope of market risk.

Third: Market timing makes sense – Mandelbrot’s study shows that market moves tend to group and that a couple of large up and down movements are at fault for most profits and losses.

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