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Economist Obituary Recalls Mandelbrot's Scrutiny of Financial Markets

October 26, 2010

In a recent article about the beautiful mathematics and significance of the late Benoît Mandelbrot, “the father of fractal geometry,” The Economist (October 21, 2010) said, "For a time fractals seemed the answer to everything: the shape of clouds, the growth of organisms, even why the night sky is dark."

Then, the publication said, "the world lost interest."

It should not have, for among Mandelbrot’s beliefs was a, according to the article, “conviction that financial-market movements, too, have fractal forms, rather than the familiar bell shapes of ‘normal’ distribution that Gauss also described.”

If Mandelbrot’s belief proved correct, trading models based on Gauss’s distribution were bound to be wrong. Mandelbrot said so in The (Mis)behavior of Markets: A Fractal View of Risk, Ruin, and Reward (2004), co-authored by Richard L. Hudson.

"That markets are not Gaussian has now been accepted," according to The Economist.

Mandelbrot’s interpretation, however, has not. “Even if it had been, the bankers might not have noticed. They preferred algorithms to geometry,” concluded the article.

For more on Mandelbrot, watch Mandelbrot’s final TED talk, which was released in July 2010.

Source: The Economist (October 21, 2010)

Start Date: 
Tuesday, October 26, 2010