The (Mis)Behavior of Markets: A Fractal View of Financial Turbulence

By Benoit B. Mandelbrot, Richard L. Hudson

Categories: Business & Money, Science & Math

Mathematician Benoit B. Mandelbrot, the inventor of fractal geometry, and journalist Richard L. Hudson critique the foundations of modern finance. They argue that standard financial theories wrongly assume price changes follow a normal distribution, which underestimates the risk of large, sudden swings. Using fractal mathematics, the authors show that markets are far more turbulent than conventional models suggest, and call for new tools to understand risk.

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• Shane Parrish: “A critique of modern finance theories, which usually gets built on the underlying assumption that distributions are normal.”