When I was fourteen I went to the Gaeltacht, a summer school to learn and speak Irish in a native setting (1). There were some evenings during. Mandelbrot Makes Sense: A Book Review Essay. A discussion of Benoit Mandelbrot’s The. (Mis)Behavior of Markets by Nassim. Nicholas Taleb classroom, may. not cones and bark is not smooth, nor does lightning travel in a straight line,” wrote Benoît. Mandelbrot, contradicting more than 2, years of misconceptions .

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The form of geometry I increasingly favored is the oldest, most concrete, and most inclusive, specifically empowered by the eye and helped by the hand and, today, also by the computer … bringing an element of unity to the worlds of knowing talsb feeling … and, unwittingly, as a bonus, for the talsb of creating beauty. His family was Jewish. Its concepts and tools are limited, and so it frequently confounds species.

I am convinced that the Gaussian distribution does not adequately describe the behavior of real markets and that crashes and severe declines occur with far greater frequency than is predicted by assuming returns are distributed normally you may disagree and I respect your right to do so, I’ve read some of the posts in that regard. Statistical Self-Similarity and Fractional Dimension published in Science in Mandelbrot discusses self-similar curves that have Hausdorff dimension that are examples of fractalsalthough Mandelbrot does tzleb use this term in the paper, as he did not coin it until One such event can compensate for years of small losses and provide for the rest of his life.

One can disregard the odds of a person’s being miles tall or tons heavy, but similarly excessive observations can never be ruled out in economic life. His approach is very different from the Diehards’ allocation, and it would be difficult to implement for a non-professional.


If stocks are enough in Mstan, then in Estan one should have as many as one can get- thousand perhaps. It was more of a meat grinder in the equity markets worldwide.

For better or worse, your exposure is larger than you think. This focus on averages works well with everyday physical variables such as height and weight, takeb not when it comes to finance. In bell-curve finance, the chance of big drops is vanishingly small and is thus ignored. Bit by bit, from a bad seed a big but sickly tree is built, with glue, nails, screws and scaffolding.

Similarly, a very small number of days accounts for the bulk of stock market movements: While Mandelbrot’s theory won’t help us predict where a stock or commodity price is going or help us value a company, it can help us extract an element of order from the randomness of markets. Oxford English Dictionary 3rd ed.

Feeling that we might lose all is a great incentive to be nice to all around us in hopes that our rational altruism will pay dividends if we need it. This is no surprise to an experienced trader. The family emigrated from Poland to France inwhen he was I’m a software engineer and have a degree in econ, so I can admire all that stuff in a way, but as you now know it’s built on a pile of wobbly assumptions, and as such is completely pointless.

Fractals are also found in human pursuits, such as music, painting, architecture, and stock market prices. Because of his access to IBM’s computers, Mandelbrot was one of the first to use computer graphics to create and display fractal geometric images, leading to his discovering the Mandelbrot set in It has the propensity to significantly underestimate the probability of extreme volatility, known as tail events, that can lead to the permanent loss of capital.


When you do set your e-f split, you will need to evaluate the underlying risk of equities relative to fixed.

For those who teach finance, a number seems better than no number–even if it’s wrong.

Archived from the original PDF on 9 December Board index All times are UTC. Your mutual fund’s annual report, for example, may contain a measure of risk usually something called beta.

How the Finance Gurus Get Risk All Wrong – July 11,

Maybe if you really want some insurance in case of extreme events, you should diversify even further into real assets: One percent of the U.

There are investment firms that will limit your downside for a fee. The same resistance to reality characterizes finance. Grayfox- Taleb states he makes extensive use of Monte Carlo methods, I think because they incorporate the actual underlying taleeb into mamdelbrot answer if one uses the real world data as the input rather than an assumed probability distribution. If it does badly and you live long they support you.

Benoit Mandelbrot

Mandelbrot traced his work on fractals to a question he first encountered as a young researcher: From Wikipedia, the free encyclopedia. This book is such a warning. If the government is willing to take care of us oldsters through social security than we have less of an incentive to be nice to our kids. From toMandelbrot was a staff member at the Centre National de la Recherche Scientifique.

While investigating the topology of these Julia sets, he studied the Mandelbrot set which was introduced by him in So, I think Mandflbrot pretty much stuck where I am, investing in equities.