When Mandelbrot took a price chart and zoomed in from a year to a month to a single day, the wiggliness of the line did not change. In other words, price histories were self-similar—like a cauliflower. “The very heart of finance,” Mandelbrot concluded, “is fractal.” The fractal model of financial markets that Mandelbrot went on to develop has never caught on with finance professors, who still by and large cling to the efficient market hypothesis. If Mandelbrot’s analysis is right, reliance on orthodox models is dangerous. And so it has proved, on more than one occasion. In the summer of 1998,
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