Monday, May 19, 2014


"Finance is a black box covered by a veil.  Not only are the inner workings hidden, but the inputs are also obscured, by bad economic data, conflicting news reports, or outright deception.  What coefficient of correction should I apply to a broker's self-serving stock tip?  And then there is the most confounding factor of all, anticipation.   A stock price rises not because of good news from the company, but because the brightening outlook for the stock means investors anticipate it will rise further, and so they buy.  Anticipation is a feature unique to economics.  It is psychology, individual and mass - even harder to fathom than the paradoxes of quantum mechanics.  Anticipation is the stuff of dreams and vapors."
-Benoit Mandelbrot and Richard L. Hudson,  The (Mis)Behavior of Markets:  A Fractal View of Financial Turbulence

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