Sunday, February 15, 2009

Book Review (#1 of 2009)

Pretty sad that I've only downed one book so far.

The (Mis)Behavior of Markets by Benoit Mandelbrot & Richard L. Hudson.

Mandelbrot is the "father of fractal geometry." He's a mathematician who has spent much of his career looking at prices and markets. He argues pretty forcefully that any of the risk management techniques used by Wall Street are based on false assumptions and have been proven to fail time and again.

Mandelbrot is Nassim Taleb's mentor. I've gotten to the point where I wonder if, as a Christian, I can still teach economic orthodoxy (much less finance classes like risk management) with a clear conscience. The models and systems that modern finance uses to calculate risk are unrealistic and fail. Econometric modeling is guilty of the same sins.

It shakes the foundations of my learning to the core. Here's another blogger's review of the book, the comments are very insightful.

4.5 stars out of 5.

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