Extreme price swings are the norm in financial markets - not aberrations that can be ignored. Price movements do not follow the well-mannered bell curve assumed by modern finance; they follow a more violent curve that makes an investor's ride much bumpier. A sound trading strategy or portfolio metric would build this cold, hard fact into its foundations. Exactly how depends on the resources, talents and stomach for risk of the individual; as ever, differing opinions make a market. But already, the mere knowledge that markets vary wildly is useful.
-Benoit Mandelbrot and Richard Hudson, excerpted from The (Mis)Behavior of Markets: A Fractal View of Risk, Ruin & Reward
Subscribe to:
Post Comments (Atom)
Posts
No comments:
Post a Comment