Re: financial models fundamentally flawed ..

["Phil Da Lick!" <phil_the_lick@xxxxxxxxxxxxxxxxxxxxxxxxxxxxxx>]

Roy Schestowitz wrote:
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> ____/ Doug Mentohl on Tuesday 03 March 2009 14:31 : \____
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> > This book chronicles Mandelbrot's forty-year quest to understand how the
> > stock market works, and his search for a better mathematical model ..
> >
> > According to Mandelbrot, all this work is fundamentally flawed as it
> > underestimates the wild behaviour of financial markets, which makes them
> > so risky ...
> >
> > http://plus.maths.org/issue37/reviews/book1/index.html
> Must-watch video on bogus models:
>
> http://www.youtube.com/watch?v=F-QA2rkpBSY&feature=related
His logic is flawed. In the oil example he states that the usage in the 
period in the 70s is more than all that had gone before. That would only 
be the case if there'd been a steady rate of growth since the very dawn 
of the oil industry, which was unspecified. You can assume it probably 
was higher than 7% but assumption is the mother of all fuckups.