Finally, a book that not only explains the relationship between investing and chaos theory--the cutting-edge dicipline that Business Week says will "revitalize the money-management industry"--but also shows readers how to use the theory to master the financial markets. Illustrated.
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BS Electrical Engineering, 1969, Rutgers University and four year starting right wing on the Rutgers Ice Hockey Club.
MS Physics, 1972, Monmouth University where I learned the Ising Model of statistical physics under Dr. Louis Kijewski.
Author of:
"Stock Market Fluctuations," Letters, Physics Today, February 1979 suggested that the stock market was an "open" system that required a continuous flow of money to maintain valuation levels and that at a critical phase transition point the market was highly susceptible to the impact of random noise as illustrated by the October Market Massacre of 1978. This letter was submitted as a comment on Dr. Rolf Landauer's earlier article on the influence of noise on open systems far from equilibrium.
"The Coherent Market Hypothesis," Financial Analysts Journal, Nov/Dec 1990) submitted after presentation of a talk to the New York Society of Quantitative Analysts which introduced the application of statistical physics to finance before the term econophysics had been invented by Dr. Eugene Stanley. Basically proposed that the probability distribution governing market returns changes dramatically as a function of two control parameters: 1. the level of "groupthink" among investors; and 2. the prevailing fundamental bias.
"Profiting From Chaos," McGraw-Hill, 1994 explained how the success of leading market analysts and money managers was consistent with the Coherent Market Hypothesis. Each chapter features a leading money manager's basic strategy and shows how it is supported by nonlinear finance theory.
"Particles at Cutoffs in the Electromagnetic Spectrum," Physics Essays, Volume 14, No. 3, September 2001 finally got this published after having the original "ahah!" my senior year at Rutgers. Introduces a finite difference formulation of Maxwell's Equations for free space, resulting in cutoff frequencies in the frequency domain of the electromagnetic spectrum, and particle behavior at frequencies approaching cutoff. The nonlinear dispersion relationship turns out to be equivalent to the Lorentz transformation of relativity theory. Interesting that while my stock market theory has been cited by research around the world, there has been absolutely no comment on this fundamental physics paper that bridges electromagnetic theory, quantum theory and relativity theory.
MS Physics, 1972, Monmouth University where I learned the Ising Model of statistical physics under Dr. Louis Kijewski.
Author of:
"Stock Market Fluctuations," Letters, Physics Today, February 1979 suggested that the stock market was an "open" system that required a continuous flow of money to maintain valuation levels and that at a critical phase transition point the market was highly susceptible to the impact of random noise as illustrated by the October Market Massacre of 1978. This letter was submitted as a comment on Dr. Rolf Landauer's earlier article on the influence of noise on open systems far from equilibrium.
"The Coherent Market Hypothesis," Financial Analysts Journal, Nov/Dec 1990) submitted after presentation of a talk to the New York Society of Quantitative Analysts which introduced the application of statistical physics to finance before the term econophysics had been invented by Dr. Eugene Stanley. Basically proposed that the probability distribution governing market returns changes dramatically as a function of two control parameters: 1. the level of "groupthink" among investors; and 2. the prevailing fundamental bias.
"Profiting From Chaos," McGraw-Hill, 1994 explained how the success of leading market analysts and money managers was consistent with the Coherent Market Hypothesis. Each chapter features a leading money manager's basic strategy and shows how it is supported by nonlinear finance theory.
"Particles at Cutoffs in the Electromagnetic Spectrum," Physics Essays, Volume 14, No. 3, September 2001 finally got this published after having the original "ahah!" my senior year at Rutgers. Introduces a finite difference formulation of Maxwell's Equations for free space, resulting in cutoff frequencies in the frequency domain of the electromagnetic spectrum, and particle behavior at frequencies approaching cutoff. The nonlinear dispersion relationship turns out to be equivalent to the Lorentz transformation of relativity theory. Interesting that while my stock market theory has been cited by research around the world, there has been absolutely no comment on this fundamental physics paper that bridges electromagnetic theory, quantum theory and relativity theory.
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3 of 3 people found the following review helpful:
4.0 out of 5 stars
Profiting from Chaos--2003 Nobel Prize in Economics Winners,
By Gordon C. McMeekin (Plymouth, Michigan, 48170 USA(P.O. Box 6007)) - See all my reviews
This review is from: Profiting from Chaos: Using Chaos Theory for Market Timing, Stock Selection, and Option Valuation (Hardcover)
The topic of this book: Using Chaos Theory for Market Timing, Stock Selection and Option Valuation--corresponds to that area of Economics reflected in the current Nobel Prize in Economics Winners for 2003! This book by Tonis Vaga, "Profiting from Chaos: Using Chaos Theory for Market Timing, Stock Selection, and Option Valuation", Dec., 1994; ISBN 0-07-066786-1 is about 9 years ahead of its time. The original definition of chaos emphasized the apparent unpredictable behavior arising in a dynamic deterministic system because of great sensitivity to initial conditions. If two arbitrarily close starting points diverge exponentially so that their future behavior becomes unpredictable then chaos has arisen! This is characteristic of weather, stock markets, and commodity markets. However, short term and middle term weather forecasting is performed regularly before the long term effects of chaos sets in. This is the same type of strategy used in this book for Market Timing, Stock Selection, and Option Valuation by use of Chaos Theory. There is an underlying regularity in a function that exhibits chaos which can be revealed by systematic perturbations to the trajectory. Just like weather forecasting can be successful by redefining the short and medium term (i.e., defacto systematic perturbations) then "Profiting from Chaos" in the short and medium term is also possible. The Nobel Committee in Oslo, Norway has just confirmed the underlying thesis of Tonis Varga's book by this year's Nobel Prize in Economics award! I suspect that a revised edition will now be in the works, but get the original version before it is too late!
15 of 21 people found the following review helpful:
2.0 out of 5 stars
Interesting,
By Christoph Michel (sinnmic@netvigator.com) (Hong Kong) - See all my reviews
This review is from: Profiting from Chaos: Using Chaos Theory for Market Timing, Stock Selection, and Option Valuation (Hardcover)
The coherent market hypothesis (CMH) presented in this book is an interesting alternative to the commonly used efficient market hypothesis. However, nonlinear dynamical systems have had less impact on economics than on other sciences. For good reasons. In economics there is rarely a theoretical reason for expecting to find one form of nonlinearity rather than another. As a result, the concepts presented in this book are quite interesting, but none of them is particularly convincing. In addition, the complex mathematics are not clearly explained. Empirical verification of the CMH is therefore extremely difficult, if not impossible. The practical value of this book is rather limited and does not provide enough reasons to abandon the assumptions of the efficient market hypothesis as a basis for day-to-day trading decisions.
3.0 out of 5 stars
Extremely challenging technical book.,
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This review is from: Profiting from Chaos: Using Chaos Theory for Market Timing, Stock Selection, and Option Valuation (Hardcover)
One of the most difficult books, I've ever not been able to read. Before you purchase this book be advised that it is a highly technical book requiring an in-depth advanced understanding of Stock Market technical analysis, economics and higher math. If you have a PhD in economics and have this kind of background then this book may be for you. I am going to read more about technical analysis and chaos theory mathmatics and try reading it again in the future.
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