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The (Mis)behavior of Markets Hardcover – August 3, 2004
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Top Customer Reviews
Isn't it this positivism that the majority of practitioners of finance exhibit? I myself, though not a practitioner, held such thoughts. My reasoning had been based however more upon majority's acceptance -- if everyone else is acting upon the assumptions of normality and independence, I thought, what good will there be adopting a new theory? Isn't finance more akin to social sciences than to natural sciences after all?
It is these beliefs that Mandelbrot sets out to dispel with this monograph. He does so convincingly with great confidence and tenacity. The book consists of three parts, first the examination of the current theories (CAPM, MPT, Black-Scholes), next explanation of his methodology (fractal analysis), and finally of posing questions that should be answered (Mandelbrot asserts that virtually all the current theories should be reexamined under more realistic assumptions).Read more ›
Because the two main assumptions of modern finance are flawed, all related models are flawed as they understate risk. If such models understate risk, they actually overprice stocks and underprice options, and also understate the capital financial institutions should hold to withstand market risk.
If the author had stopped there, I would have given him a 5 rating. However, such a rebuttal of finance theory would make no more than a great essay. Instead, he attempts to build an entirely different edifice of modern finance over 300 pages. And, his theoretical foundation lacks any robustness. That's why I call it a castle of cards.Read more ›
As most readers, I vaguely knew about Mandelbrot and his studies on fractal geometry - but simply it was not my peculiar field of interest, so when I saw the ad of his new book, it went ignored.
Taleb's editorial aroused my curiosity.
He was stressing the significance of this essay in challenging the current orthodoxies on finance and in recommending new tools for risk management.
In a sense Taleb's recommendation represents a guarantee.
He is a famous edge fund manager and the author of "Fooled by Randomness - The hidden role of chance in the Markets and in life", a book that impressed me with the wide culture, multi-disciplinary approach and the sheer acumen.
"The (mis)Behavior of the Market" was up to my expectations.
The book is interesting, and not just for the economic views it advances. Mandelbrot is extremely learned - not just in his field of expertise - and his approach is challenging while retaining great plainness of exposition.
The book is organized in three parts.
The first part deals with the old theories of finance and with the state of the art, to show how all of the old tools are mostly inadequate to control investment risk and how they leave investors with a false sense of safety.
In the second part - the most specific and technical - Mandelbrot proposes his view of how the markets behave, suggesting a multi-fractal approach as a substitute for the random walk/efficient market theory.
The third part proposes some conclusion based both on Mandelbrot's views and common sense.Read more ›
Most Recent Customer Reviews
Those managing your money get lucky a lot but also lose big because the tools they use don't deal with the exceptional event. Read morePublished 4 days ago by Richard G.W. Kenyon
For those who have never heard of fractals and have known little about finance, this is very good. The articles are little cliche.Published 1 month ago by Amazon Customer
What a load of crap. The idiot savant style of writing is just unbearable. Given up after 60%.Published 3 months ago by Sheng
By far, this is one of the best books I've read on real-life investing. Most financial planners and investment professionals use the models critiqued in this book and treat them as... Read morePublished 4 months ago by Beek2350
The Risk associated with any investment, including mutual funds, retirement plans, stocks, and options, is currently calculated with inadequate tools, by all the major banking... Read morePublished 4 months ago by Luca Columbu
A number of increasingly loud voices have pointed out the absurdities propagated by investment "professionals" and politicians in recent decades. Read morePublished 4 months ago by Shawn Mahaney
Great book, I very much enjoyed it. It has a rather aggressive tone and is geared toward the laymen, but still a great read.Published 5 months ago by Max M
Ooof, what to say about this book? I was really looking forward to learning about fractals and I did learn a bit, but the book is so slow and so unmathematical and so much about... Read morePublished 6 months ago by RonnieT