## A Mathematician Plays The Stock MarketIn A Mathematician Plays the Stock Market best-selling author John Allen Paulos demonstrates what the tools of mathematics can tell us about the vagaries of the stock market. Employing his trademark stories, vignettes, paradoxes, and puzzles (and even a film treatment), Paulos addresses every thinking reader's curiosity about the market: Is it efficient? Is it rational? Is there anything to technical analysis, fundamental analysis, and other supposedly time-tested methods of picking stocks? How can one quantify risk? What are the most common scams? What light do fractals, network theory, and common psychological foibles shed on investor behavior? Are there any approaches to investing that truly outperform the major indexes? Can a deeper knowledge of mathematics help beat the odds?All of these questions are explored with the engaging erudition that made Paulos's A Mathematician Reads the Newspaper and Innumeracy favorites with both armchair mathematicians and readers who want to think like them. Paulos also shares the cautionary tale of his own long and disastrous love affair with WorldCom. In the tradition of Burton Malkiel's A Random Walk Down Wall Street and Jeremy Siegel's Stocks for the Long Run, this wry and illuminating book is for anyone, investor or not, who follows the markets-or knows someone who does. |

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#### A MATHEMATICIAN PLAYS THE STOCK MARKET

User Review - Jane Doe - KirkusA severe investment miscalculation leads to valuable lessons about the tricky psychology and thorny arithmetic of the market.Bestselling mathematician Paulos (Innumeracy, 1988, etc.; Mathematics ... Read full review

#### A mathematician plays the stock market

User Review - Not Available - Book VerdictWhat at first appears to be a sour grapes account of investing in ill-fated WorldCom stock during 2000-02 is actually a tour of investing with a mathematical twist. As he recounts the decline of his ... Read full review

### Contents

1 | |

ket SellOffs 2 Fear Greed and Cognitive Illusions | 13 |

Trends Crowds and Waves | 37 |

Chance and Efﬁcient Markets | 57 |

Value Investing and Fundamental Analysis | 85 |

Options Risk and Volatility | 117 |

Diversifying Stock Portfolios | 141 |

Connectedness and Chaotic Price Movements | 163 |

From Paradox to Complexity | 187 |

Bibliography | 203 |

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### Common terms and phrases

80 percent accounting analysts assume behavior believe Benford’s Law Bernie Ebbers beta calls chance coin ﬂips common knowledge company’s complexity covariance decline deﬁned deﬁnition difﬁcult dollars earnings Efﬁcient Market Hypothesis Enron equal example expected value ﬁgures ﬁnancial ﬁnd ﬁrst ﬁve formula fundamental analysis funds golden ratio guess Handheld inﬂation inﬂuence investment investors less lose Louis mathematical mean million moving average notion one’s options Otto P/E ratio patterns people’s Phone pick play player portfolio power law predict price movements probability pump and dump puts random rate of return reason reﬂect result rise risk risk-free risky rules scam sell sequence shares short-selling shorting and distorting sometimes speciﬁc standard deviation stock market stock price story strategy sufﬁcient tails technical analysis there’s tion tively trading treasury bills UUNet value investing variance vestors volatility WCOM WCOMM week What’s WorldCom