tag:blogger.com,1999:blog-5465015914589377788.post3689558709461650910..comments2020-02-24T17:35:27.118-05:00Comments on Michael James on Money: Studying Financial Markets with FractalsMichael Jameshttp://www.blogger.com/profile/10362529610470788243noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-5465015914589377788.post-72089809234270447672009-09-01T00:24:01.827-04:002009-09-01T00:24:01.827-04:00Oh, that's too perfect. I literally wrote a s...Oh, that's too perfect. I literally wrote a sentence in my original comment that said "for example, if you add lots of dice, you get a gaussian no matter what numbers are on the dice!" But I deleted it because it's not exactly true (what if all the faces have the same number?) and I thought I had already made my point.<br /><br />Anyway, thanks for reminding me of a little concept called the "finite mean". That's pretty important.Patrickhttps://www.blogger.com/profile/16816252455472704262noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-27868922554406256892009-08-31T12:05:39.377-04:002009-08-31T12:05:39.377-04:00I think the solution is easy. Instead of using Gau...I think the solution is easy. Instead of using Gaussian, use the Mandelbrot distribution, where 2 standard deviation events account for a total 10% + probability. Solved the problem and MPT is still somewhat useful.Henrynoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-12487495003371441032009-08-31T11:01:47.671-04:002009-08-31T11:01:47.671-04:00Patrick: You're anticipating tomorrow's po...Patrick: You're anticipating tomorrow's post. We're not really disagreeing, here, but I was talking about "exactly exactly" :-) We get arbitrarily close to the Gaussian summing many distributions, but we never quite get there in the real world. And this only applies to curves with a finite mean. Wilder distributions of the type that Mandelbrot applies to finance do not have finite means.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-77995835934602847532009-08-31T10:43:18.940-04:002009-08-31T10:43:18.940-04:00Well, the gaussian is sometimes exactly the right ...Well, the gaussian is sometimes exactly the right curve, especially in gambling. My vague recollections of second-year electrical engineering math tells me that the result of convolving a large number of curves always converges toward a gaussian, no matter what the original curve was.<br /><br />Hmm... I guess this means that if stock market returns don't obey a gaussian distribution, then it can't be modeled by adding together many independent events, because then it would necessarily be gaussian.Patrickhttps://www.blogger.com/profile/16816252455472704262noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-48527380160045807822009-08-31T09:48:11.321-04:002009-08-31T09:48:11.321-04:00I'm writing a post based on the Yogi Berra quo...I'm writing a post based on the Yogi Berra quote (paraphrased):<br /><br />In theory, theory and practice are the same. In practice, they aren't.WhereDoesAllMyMoneyGo.comhttps://www.blogger.com/profile/09185007666460707356noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-63457440228653338382009-08-31T08:33:43.031-04:002009-08-31T08:33:43.031-04:00After reading the book I too wondered how the heck...After reading the book I too wondered how the heck I could his conclusions.CanadianInvestorhttps://www.blogger.com/profile/05645767559302303541noreply@blogger.com