The (mis)behavior of markets
by Benoît B. Mandelbrot, Richard L. Hudson · first published 2004
79% recommend21% neutral
Why HN recommends it
Mandelbrot argues market risk is fractal and fat-tailed, so extreme crashes like 1987 are more common than standard models assume. Readers with some finance background get a clear challenge to efficient-market thinking.
Summarised by Claude from recommending comments
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…unconvinced that debt causes crashes. I personally believe that debt systems aggregate small, localized crashes which happen all the time into large, systemic crashes. A good resource is Mandelbrot's (mis)behavior of markets. It explains a lot of things like how the Pareto principle appears. Reading between the lines, it is easy to see how levy-alpha-stable distributed events can aggregate into bigger levy-alpha-stable…
on “A Batesian Mimicry Explanation of Business Cycles (2010)” ↗…analysis... it's just the best tool that we have. Incredibly unlikely statistical events happen all the time in finance. A great read on an alternative view on the topic of using statistics for finance is The (Mis)Behavior of Markets by Benoit Mandlebrot [1]. It's very well written, basic enough for most to comprehend and first book on finance I read in college (before I went on to major in finance + math). The aforementioned book…
on “Once-In-a-3B-year Statistical Move – Jamie Dimon on the US Bond Market” ↗Non-fiction The Emperors New Mind - Roger Penrose Godel, Escher, Bach - Douglass Hoffstadter Brocas Brain - Carl Sagan The (mis)Behavior of Markets - Benoit Mandelbrot The Black Swan - Nicholas Nassem Taleb Fiction Gates Of Fire - Stephen Pressfield Neuromancer - William Gibson Snow Crash - Neal Stephenson Hardwired - Walter Jon Williams Altered…
on “Ask HN: What book have you given as a gift?” ↗For those interested, "The (Mis)Behavior of Markets" by Benoit Mandelbrot and Richard Hudson examines, among many other things, the 1987 "Black Monday" event. Mandelbrot theorizes that sudden, disproportionate events such as these may be much more common…
on “Today the Dow dropped 1000 points in about ten minutes.” ↗Fooled by Randomness, The Black Swan - Nassim Nicholas Taleb The (Mis)behavior of Markets - Benoit Mandelbrot The Stuff of Thought - Steven Pinker The Logic of Scientific Discovery - Karl Popper The Four Steps to Epiphany - Steven G. Blank
on “Ask HN: Please name two of your most favorite books.” ↗"The (Mis)behavior of Markets" is a great read on the subject, by Mr. Mandelbrot himself.
on “Mandelbrot Beats Economics in Fathoming Markets” ↗The (mis)Behavior of Markets, A Fractal View on Risk, Ruin, and Reward by Benoit B. Mandelbrot and Richard L. Hudson. You may enjoy this book if you are interested in Financial Markets, have some knowledge of Efficient Market Theory,…
on “Ask HN: What book are you reading?” ↗One book that I have enjoyed is "The (Mis)Behavior of Markets: A Fractal View of Risk, Ruin, and Reward" by Benoit Mandelbrot. Have a look at his Wikipedia page, it has a link to the book on the Internet Archive. Many here have mentioned "A Random Walk Down Wall…
on “Ask HN: Introductory Books on the Stock Market?” ↗I would highly recommend that you read Mandelbrot's books and Nassim Taleb's books. For Mandelbrot, I'd recommend starting with The (Mis)Behavior of Markets. For Taleb, maybe start with The Black Swan. With those books you'll be able to fully understand why even if/when AI becomes sentient, it will still not help avoid blow ups. (One reason among many others…
on “NautilusTrader: Open-source algorithmic trading platform” ↗…of one of the most complex, dynamic, and intractable systems we know of, and no school has it completely right yet, all are subject to further revision. 5. In that vein, read Benoit Mandelbrot's The (Mis)Behavior of Markets for a good discourse on why economics is so difficult and intractable. http://www.bearcave.com/bookrev/misbehavior_of_markets.html 6. Also read Charlie Munger's Harvard Commencement speech, "On the…
on “Ask HN: what are some good resources to understand economics?” ↗May be slightly beyond what you are looking for, but "The (Mis)Behavior of Markets"
on “Ask HN: Recommendations for an in-depth book/video series about economics” ↗…Malcolm Gladwell and Daniel Kahneman (author of Thinking, Fast and Slow) both credit Nassim Taleb for a lot of inspiration in their books. Someone mentioned to me that Benoit Mandelbrot (author of (Mis)behavior of Markets) inspired Nassim Taleb for a lot of his thoughts. So there... read Mandelbrot, Gladwell and Kahneman to understand Nassim Taleb.
on “Nassim Nicholas Taleb, Author of Black Swan, on Bitcoin” ↗…Taleb's are more on a philosophical level than What I Learned. - You get more out of Taleb's books if you also read the stuff he references in his bibliographies, from What I Learned..., to Mandelbrot's (Mis)behavior of Markets (understanding Black Swans in terms of fractal randomness gives it a whole new meaning), to Taleb's first book on trading Dynamic Hedging (where he basically explains his extremely technical trading strategy…
on “Ask HN: Good resources for learning+getting into Finance / Trading?” ↗…universe of infinite variables, an infinite number of combinations exist and could manifest anytime a given set of vulnerabilities and unanticipated outlier events present themselves concurrently. [0] The (Mis)Behavior Of Markets 2004 http://www.goodreads.com/book/show/665134.The_Mis_Behavior_o... [1] 2006 reminder http://www.ft.com/cms/s/2/5372968a-ba82-11da-980d-0000779e23... [2]The Quants Great Monday Morning QB analysis…
on “Mathematician Says Big Data Is Causing a ‘Silent Financial Crisis’” ↗…three isolated minutes in the whole twenty-four hours: between 3:12 and 3:14 p.m. New York time, and between 3:24 and 3:25 p.m. This was no mere financial storm. It was a hurricane." -Mandelbrot, The (mis)Behavior of Markets Your position is also highly reductionist, Taleb covers a lot of broad ground, including his own models, which are duly hedged from his perspective as a staunch empiricist.
on “Why read Dostoevsky? A programmer's perspective” ↗