The Misbehavior of Markets: A Fractal View of Financial Turbulence

Benoit Mandelbrot (1924-2010) was most famous for his work in mathematics (and especially fractals), but in the 1960s and 1970s he wrote frequently about the stock market and finance. Here he summarizes many of his key arguments, including what he believes to be the high degree of asset price volatility, significant tail risks, and historically-dependent nature of price movements — all of which run counter to the stronger versions of the Efficient Market Hypothesis that dominated theoretical American finance for many years. Unfortunately Mandelbrot too often mischaracterizes the views that EMH proponents actually hold, and takes an annoying smarter-than-thou attitude toward his imaginary adversaries.