From: John Conover <john@email.johncon.com>
Subject: Re: Article in Worth magazine...
Date: Sat, 22 Mar 1997 12:05:21 -0800
Rick McGeer writes:
>
> By the way, there's an interesting article in this month's Worth magazine
> on SFI. Interesting perspective on why fractal analysis predicts the
> market.
> Essentially (the claim is) a market composed of traders imbued with liberal
> amounts of fear and greed, and incomplete information, will produce a
> fractal market.
>
[4] goes into the formal arguments in depth, with intuitive
examples. As pointed out by Arthur[1], "... [these systems] become
self-referential and deductively indeterminate. This indeterminacy
pervades economics and game theory." [2] should be required reading
for anyone in industry, because it is argued that industrial markets
are fractal, as is all business, as argued in[3], as is the economy in
general, as argued in[5].
The tsinvest program works just fine operating on P&L data, the US
GDP, or semiconductor market growth/dynamics, as well as equity
markets.
John
If you want to persue it further, much of Brian Arthur's work is on line:
[1] W. Brian Arthur. "Complexity in Economic and Financial
Markets." Complexity, 1, pp. 20-25, 1995. Also available from
http://www.santafe.edu/arthur, February 1995.
[2] W. Brian Arthur. "Competing Technologies, Increasing Returns,
and Lock-In by Historical Events." Econ Jnl, 99, pp. 106-131,
1989. Also available from http://www.santafe.edu/arthur, Jun,
1988.
[3] W. Brian Arthur. "Increasing Returns and the Two Worlds of
Business." To appear in Harvard Business Review, July-Aug., 1996,
under the title "Increasing Returns and the New World of
Business," forthcoming. Also available from
http://www.santafe.edu/arthur", Apr, 1996.
[4] W. Brian Arthur. "Inductive Reasoning and Bounded
Rationality." Amer Econ Rev, 84, pp. 406-411, 1994. Session:
"Complexity in Economic Theory", chaired by Paul
Krugman. Available from http://www.santafe.edu/arthur.
[5] W. Brian Arthur. "Positive Feedbacks in the Economy",
Scientific American, Feb. 1990. Also available from
http://www.santafe.edu/arthur, Nov, 1989.
And, while you are at http://www.santafe.edu, pick up:
[6] William A. Brock and Pedro J. F. de Lima. "Nonlinear time
series, complexity theory, and finance." To appear in "Handbook
of Statistics Volume 14: Statistical Methods in Finance," edited
by G. Maddala and C. Rao. New York: North Holland, forthcoming.
Also available from http://www.santafe.edu/sfi/publications, March
1995.
which is a survey of fractal and chaotic methodologies used in
analyzing financial time series. Everyone has their favorite, and it
is turning into a botany of concepts, methods and approaches.
--
John Conover, john@email.johncon.com, http://www.johncon.com/