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The (Mis)Behavior of Markets

3.98 of 5 stars 3.98  ·  rating details  ·  1,916 ratings  ·  98 reviews
Benoit B. Mandelbrot, one of the century's most influential mathematicians, is world-famous for making mathematical sense of a fact everybody knows but that geometers from Euclid on down had never assimilated: Clouds are not round, mountains are not cones, coastlines are not smooth. To these classic lines we can now add another example: Markets are not the safe bet your br ...more
Hardcover, 352 pages
Published August 3rd 2004 by Basic Books (first published September 18th 1997)
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Duffy Pratt
I first heard about the efficient market theory in Law School. I remember thinking at the time what obvious bullshit it was. But it was academia, and it was pretty harmless bullshit, so let the economists play whatever games they want. What difference did it make?

The theory goes that the markets already consolidate all the information available to them, so that price already incorporates all the information available to the market. From there, we get the random walk theory -- that prices will mo
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David
Benoit Mandelbrot is the inventor of the mathematical concept of fractals. His earlier book The Fractal Geometry of Nature was a truly groundbreaking book about fractals and how they are seen in nature. In The Misbehavior of Markets he turns his attention to the application of fractal concepts to markets. Mandelbrot shows that price fluctuations:
1) are not independent from one time period to the next
2) appear to be the same, regardless of the time scale involved (hours/days/months/years)
3) do no
...more
Ivan Idris
In these turbulent economy we seem to be victims of the financial markets. Benoit Mandelbrot, famous mathematician and inventor of fractal geometry, joined forces with Richard Hudson, to write a book about financial theory. “The (Mis)behavior of Markets” falls in the popular science genre. It is low on formulas, instead you can find lots of historical anecdotes and opinions.

1. Risk, Ruin and Reward

We start with a brief history of finance. The author asks us to play a game. Out of 4 charts we nee
...more
Rene

I really can't believe how far this book falls short of what it could have been. I was expecting an in-depth theoretical exploration and practical application of fractal geometry in finance, but instead I got a popular science book written for the general reader.

This book covers the bare minimum about fractal geometry and doesn't advance beyond the superficial discussions (compared to Benoît Mandelbrot's 1982 book The Fractal Geometry of Nature), at least it seems to me.



Fractals are shapes that
...more
David
The (Mis)Behavior of Markets by Mandelbrot and Hudson is a pretty good book about a fascinating topic. Mandelbrot's thesis is that many common beliefs underpinning market modeling software are fundamentally incorrect, and that in using them we are exposing ourselves to massively more risk than we expect. This book was published in 2004.

To describe Mandelbrot as prescient in characterizing the inadequacy of market modeling is to understate the situation. Using very little serious math and very fe
...more
John Tye
Like most good books about the markets, Benoît Mandelbrot's The mis Behavior of Markets is not really about trading or making money (although, if it helps you better understand risk, it could save you money--which is essentially the same as making money). In fact, one could almost say the book is about fractal processes, using the markets as a case study. In this way, it is reminiscent of Nassim Nicholas Taleb's Fooled by Randomness, which uses the markets largely as a basis to investigate logic ...more
Emily
This book lays lots of groundwork before it finally gets to the point. I would recommend a reader read the first chapter of part III (10 Heresies of Finance) at the start to give yourself a grounding then read the rest of the book. It might help to know where he's going during part I and part II.

All in all, some interesting beginnings of theories and comparisons. There is almost no math involved. But if you're scared of math, this is a great glimpse into fractals and it starts to show glimpses
...more
Philippe Malzieu
Mandelbrot is one of the fathers of the theory of chaos. It is attractive intellectually but also by its possible applications. In medicine the lung for example is a fractal object. After the crisis of 2008, I wondered why one could not envisage occurred to them.
I discovered that the last book of Mandelbrot was precisely devoted to this problem. Mandelbrot proposes to modify the econometric algorythmes used by the banks. Those would be responsible amplify the disorders.
It is a difficult work. I
...more
Valerie
I read this several years ago, and I enjoyed it very much. I wish I could find my copy, but I loaned it to a former student, and never saw it again.
Timothy
When I first encountered this book I did a slight doubletake, "wait, THE Benoit Mandelbrot?"

"Why is he writing about financial markets?" I wondered.

I knew of Mandelbrot in mathematics, computer science, and natural sciences -- I had no idea how deep his obsession with economics was till I read this book.

In a way, it's almost depressing, his biggest contributions were to fields he didn't seem to care about as much as economics (a field that in turn didn't seem to care about his work).

Mandelbrot's
...more
Terry
This book has three characters in it:
-Benoit Mandelbrot, author
-The Market, the protagonist/antagonist/chorus as per Greek drama
-Benoit Mandelbrot's ego

Maybe it's a side effect of some incident as a child but the author has no reservations about promoting himself. Whole paragraphs are devoted to his "enlightened breakthroughs" and profound understanding of market mechanics. An understanding so deep he proposes no significant market model and merely a direction.

He stands as the most cited author
...more
Bumberings
Mandelbrot's novel "The Misbehavior of Markets" is truly a hidden gem. The deeper into the book I went, the more it spoke directly to my darkest intuitions. I actually started to get the feeling that no one else has actually bothered to read the book cover to cover.. all of his wealth of knowledge felt as if it was almost becoming my little secret. Indeed even the jacket reviews are not very convincing. Paraphrasing the Financial Times "[a famous math guy wrote a book.. Math!!]" and the Sunday T ...more
J Scott Shipman
Benoit Mandelbrot's The (Mis) Behavior of Markets is a splendid read and very informative. As many reviewers have noted, Mandelbrot invented fractal geometry. He has also been on the cutting edge (some would say fringe, but he's thinking and questioning) in multiple disciplines, as his curiosity seem to know no bounds. Mandelbrot does a good job of describing the inadequacies of the efficient market hypothesis and CAPM and other sacrosanct theories in finance, and he offers for our consideration ...more
Kate
I wish I could give this book four stars. But Mandelbrot's slightly tiring writing style prevents me from doing so. The main author obviously thinks remarkably highly of his own work (which is not a bad thing in itself--he is, after all, a revolutionary mathematician--but does he have to express it ad infinitum?), and deems himself an excellent judge of character of historical figures who he has never met. (Disclaimer: It's probably worth noting I have a very low tolerance for self-congratulatio ...more
Justin Tapp

Mandelbrot is the "father of fractal geometry." He's a mathematician who has spent much of his career looking at prices and markets. He argues pretty forcefully that any of the risk management techniques used by Wall Street are based on false assumptions and have been proven to fail time and again.

Mandelbrot is Nassim Taleb's mentor. I've gotten to the point where I wonder if, as a Christian, I can still teach economic orthodoxy (much less finance classes like risk management) with a clear consc
...more
Chanania
In a line: Very informative but unnecessarily repetitive.

The following quote by Laurence J. Peter (slightly modified to better reflect reality) is one of my favourites:
An economist is an expert who can tell you tomorrow why the things he predicted yesterday didn't happen today.

There are many people who will dismiss such an observation out of hand. "Economists are experts", they say. "Look at the successes of the banks, brokerage firms, investment management companies, etc." When you ask them to
...more
Alex Cook
Good read. Cuts through a lot of the BS of modern portfolio theory that I already flushed based on personal experience as well as by studying others (Taleb, David Einhorn, etc.). In the same way that behavioral finance theory uses psychology to explain market inefficiencies, Mandelbrot uses math--but that the same time, he makes it accessible and not overly technical, which I appreciated. The only reason why I gave it 4/5 instead of 5/5 is the book seems...incomplete. Yes, markets are not perfec ...more
Egli Papadopoulou
2004 version, Mandelbrot is still egocentric like L.Friedman. Personally I believe that the content is good, and interesting. Every sentence starts off with how talented he is and how he sees the world. Too much ego and self importance. .. 'meh' - I wish this book was more about his ideas.

Furhtermore the book explains the markets and why they aren not 'brownian'(suspended particles to the stock market) and how fractals can be used to represent trade/market.
He is also using the terms / sharpe r
...more
Jeffrey
An extremely interesting account of finance from Mandelbrot who has a non-scientific background.

The book is divided into 3 sections. First, Mandelbrot gives an account of financial theory and outlines its flaws. Second, he provides his own insights. These were interesting in that I think they gave a more numerically analytic explanation to fat tails, namely he provides a mathematical model that explains fat tails (which have been pointed out by others such as Taleb, who provide a more psychologi
...more
Ecoute Sauvage
Benoît Mandelbrot is a legend but saying that his theories have been ignored by the finance theorists and modelers just ain't so. A good introduction for those who don't know much about the subject.
Mark Speed
I'm in two minds about this book. On the one hand it was a fairly decent explanation of the chaotic nature of markets and how they work (and don't work). On the other, it was a discussion of how fractal theory was developed. So it's really about the development and application of fractal theory in markets. If you're expecting a 'how-to' book you'll be disappointed. I'd have loved more worked examples. There are probably more accessible texts by other people on markets, but Mandelbrot undoubtedly ...more
Svetlana
It's hard for me to rate this book. It covers interesting and useful stuff in principle but most of what is described in the first half of the book - how the main underlying assumptions of modern finance theory are wrong I have already read and glimpsed from other books and articles before.
The second half of the book is more interesting but there is too much diversion into other stuff (the whole bit about the Nile was I thought unnecessary long) and it probably was simplified a tad too much. No
...more
Michal Palczewski
A book about the statistical properties of markets. Contrary to some of the theory used markets are not continuous nor normally distributed. This book attempts to create a mathematical framework for modeling stock market behavior. While he does a better job then gausian theory, Mandelbrot seems to suffer from a man with a hammer syndrome. He invented fractal geometry and now tries to apply it to everything. He is convincing about power laws, and fat tails, but less so about scale invariance. Ove ...more
Maury
Mandelbrot's criticism of modern financial orthodoxy, developed over many years, is devastating. After reading his lucid explanations, one wonders how financial markets can persist in collective delusion. Less impressive is the fact that Mandelbrot's "multifractal" substitute for the Efficient Market Hypothesis really offers few practical tools for analyzing markets -- with the notable exception of apparently better ways of measuring risk. One is reminded of Marx's writing, which offers a devast ...more
Vandita
What is Mandelbrot, THE mathematician who brought 'fractal geometry' in the lexicon of maths, is doing 'dabbling' in explaining financial markets - well, he is beating all the so called financial markets theorists and experts hands down! This book is a beautiful mix of tracing evolution of financial markets theory over the centuries, using the fractal geometry ( without a SINGLE mathematical equation in sight!), and then going on to demolish the efficient market hypothesis, CAPM and the concept ...more
Muhammad
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 ob
...more
Bob Perry
This is probably the most important and insightful book on the stock market that I've ever read. I had no idea the economists base their whole dogma on mathematics that hsa been proven to be wrong.

Benoit, as always, looks at the world differently. Thats how he developed fractal geometry and how chaos theory evolved from that. When he took a look at cotton prices over 100 years he immediately realized that the data doesn't fit the current then nor now rules of evaluating risk.

He has been writin
...more
Erik Ferragut
Mandelbrot was one of the great thinkers of the 20th century. Best known for his development of fractals, he also had interests in economics and markets. His insights are clear and convincing, but contrary to conventional financial academic wisdom. For example, prices do not move continuously, markets have memory, changes come in bursts, and so on. The book is well written and the descriptions of Bachelier and Levy were worth reading. This is not a book about how to get rich (thank goodness). It ...more
Nick Klagge
Fairly disappointing. Mandelbrot is a heretic of computational finance, famous for arguing that movements in stock prices are not well-described by the Normal distribution, but are better described by strange beasts such as the Cauchy distribution, which, while it looks similar to the Normal, is sufficiently strange that both its mean and standard deviation are undefined. He talks about that in this book, and also his efforts to model financial time series using fractal techniques (which he pion ...more
Greg Linster
The seemingly improbable happens relatively frequently in financial markets. Consider this: on October 19, 1987 the Dow Jones Industrial Average (DJIA) dropped by 508 points to 1738.74 (22.61%). According to modern financial theory, the probability of that happening is roughly 10^50 (odds so small they have no real meaning).

What does a fractal view of the world of finance look like? The (Mis)Behavior of Markets: A Fractal View of Financial Turbulence elucidates on the answer and does so in bril
...more
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Benoît B. Mandelbrot was a French mathematician, best known as the father of fractal geometry. He was Sterling Professor of Mathematical Sciences, Emeritus at Yale University; IBM Fellow Emeritus at the Thomas J. Watson Research Center; and Battelle Fellow at the Pacific Northwest National Laboratory. He was born in Poland, but his family moved to France when he was a child; he was a dual French a ...more
More about Benoît B. Mandelbrot...
The Fractal Geometry of Nature The Fractalist: Memoir of a Scientific Maverick Fractals: Form, chance, and dimension Fractals and Chaos: The Mandelbrot Set and Beyond Fractal Art: The Mandelbrot Set (Postcard Portfolio)

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