Misbehavior of Markets

Benoit B. Mandelbrot, Richard L. Hudson

Basic Books, Aug 3, 2004 - Business & Economics - 328 pages

Benoit B. Mandelbrot, one of the century's most influential mathematicians, is world-famous for making mathematical sense of a fact everybody knows but that geometers from Euclid on down had never assimilated: Clouds are not round, mountains are not cones, coastlines are not smooth. To these classic lines we can now add another example: Markets are not the safe bet your broker may claim. In his first book for a general audience, Mandelbrot, with co-author Richard L. Hudson, shows how the dominant way of thinking about the behavior of markets-a set of mathematical assumptions a century old and still learned by every MBA and financier in the world-simply does not work. As he did for the physical world in his classic The Fractal Geometry of Nature, Mandelbrot here uses fractal geometry to propose a new, more accurate way of describing market behavior. The complex gyrations of IBM's stock price and the dollar-euro exchange rate can now be reduced to straightforward formulae that yield a far better model of how risky they are. With his fractal tools, Mandelbrot has gotten to the bottom of how financial markets really work, and in doing so, he describes the volatile, dangerous (and strangely beautiful) properties that financial experts have never before accounted for. The result is no less than the foundation for a new science of finance.

What people are saying

LibraryThing Review

User Review  - justindtapp - LibraryThing

Mandelbrot is the "father of fractal geometry." He's a mathematician who has spent much of his career looking at prices and markets. He argues pretty forcefully that any of the risk management ...

LibraryThing Review

User Review  - IvanIdris - LibraryThing

In these turbulent economy we seem to be victims of the financial markets. Benoit Mandelbrot, famous mathematician and inventor of fractal geometry, joined forces with Richard Hudson, to write a book ...

Contents

• Risk Ruin and Reward: 3
• By the Toss of a Coin or the Flight of an Arrow: 25
• Bachelier and His Legacy: 43
• The House of Modern Finace: 59
• The Case Against the Modern Theory of Finance: 79
• Images of the Abnormal: 88
• The New Way: 109
• Turbulent Markets A Preview: 111
• Studies in Roughness A Fractal Primer: 123
• A Fractal Gallery: 132
• The Mystery of Cotton: 147
• Long Memory from the Nile to the Marketplace: 173
• Noah Joseph and Market Bubbles: 197
• The Multifractal Nature of Trading Time: 207
• The Way Ahead: 223
• Ten Heresies of Finance: 225
• In the Lab: 253
• Notes: 277
• Bibliography: 303
• Index: 318

About the author

Benoit B. Mandelbrot is Sterling Professor of Mathematical Sciences at Yale University and a Fellow Emeritus at IBM's Thomas J. Watson Laboratory. He is the inventor of fractal geometry, whose most famous example, the Mandelbrot Set, has been replicated on millions of posters, T-shirts, and record albums. He was a leading figure in James Gleick's Chaos and has received the Wolf Prize in Physics, the Japan Prize in science and technology, and awards from the U.S. National Academy of Sciences, the IEEE, and numerous universities in the U.S. and abroad. His books include Fractals: Form, Chance and Dimension, which was later expanded into the classic The Fractal Geometry of Nature, which has sold more than 200,000 copies. This is his first book for lay readers on finance, a subject he has studied since the 1960s. He lives in Scarsdale, New York. Richard L. Hudson was the managing editor of the Wall Street Journal's European edition for six years, and a Journal reporter and editor for twenty-five years. He is a 1978 graduate of Harvard University and a 1991 Knight Fellow of MIT. He lives in Brussels, Belgium.

Bibliographic information

• Title: Misbehavior of Markets
• Authors: Benoit B. Mandelbrot, Richard L. Hudson
• Edition: illustrated
• Publisher: Basic Books, 2004
• ISBN: 0465043550, 9780465043552
• Length: 328 pages
• Subjects: Business & Economics / Economics / Theory