The (Mis)behaviour of Markets

A Fractal View of Risk, Ruin and Reward

Benoit Mandelbrot is a Polish Mathematician more commonly known as the father of Fractal Geometry, an eccentric branch of science that deals with the identification of patterns in everyday lives.

In the (Mis)behavoir of Markets, Mandelbrot attempts to apply theories of fractals onto economic phenomenon like the ups and downs of the stock market. If you look closely, he argues, the charts of stocks and indices is very much a continuous fractal and has bearings that can predicted by the diligent observer. Mandelbrot illustrates this point convincingly by comparing current and past economic crisis on a fractal chart.

However if you are looking to make a quick buck out of the fractal theory, you may wish to give this book a miss. The work is highly academic in nature and the immediate application of its theories onto a generic stock is highly suspect. While the fractal theory may work to describe the market in general, the average investor will be better off applying fundamental knowledge of the asset he wishes to invest in instead of trying to read into abstract patterns.

The (Mis)behavoir of Markets is a pleasant read and has been written with the general audience in mind. There are few mathematical equations to bog your head as most of the theories are explained clearly via diagrams.