Complexity, Risk, and Financial Markets

ISBN-13: 9780471399810 / Angielski / Miękka / 2001 / 256 str.

Edgar E. Peters

Opis

A groundbreaking look at complexity theory and its implications in the world of finance
Complexity theory tells us that processes with a large number of seemingly independent agents-such as free markets-can spontaneously organize themselves into a coherent system. In this fascinating book, Edgar Peters brings together scientific theory, the artistic process, and economics to show how the randomness and uncertainty of complexity theory can be applied to financial markets. Written in an engaging and accessible style, this is a thoughtful, conceptual look at the way free markets are, by their nature, continually evolving complex systems. Expanding on previous explorations of chaos theory, Peters draws on real-life examples ranging from the Asian crisis to America's love of conspiracy to show that complexity and randomness are necessary for the free markets to operate in a competitive manner.

Recenzje

Peters combines a chaos/complex systems framework with the Austrian school of economic thought to explain our lack of market understanding. He develops a strong case that the most pressing problem for investors is not a matter of specific models but of determining how to assess risk in a complex and uncertain world. Peters draws important distinctions between risk, uncertainty, ignorance, vagueness, and ambiguity, and in doing so, shows how the subtle meanings of words can provide immense value in explaining the market environment. He also resurrects the Austrian school′s emphasis on subjectivism and makes it come alive within finance. (Financial Analyst′s Journal)

Spis treści

Introduction: Life, Risk, and Uncertainty.

UNCERTAINTY, COMPLEXITY, AND SPONTANEOUS ORGANIZATION.

Imposing Order: Conspiracies and the Mathematics of Ignorance.

Uncertainty, Vagueness, and Ambiguity: The Need for Information.

Complexity and Time: The Dynamics of Uncertainty.

FREE MARKETS AND THE NEED FOR UNCERTAINTY.

Subjectivism: "The Economics of Time and Ignorance."

Diversity and Knowledge.

Crisis and Competition: Creative Destruction in Free Markets.

Economic Evolution: Change in Real Time.

Creativity: Uncertainty, Innovation, and Entrepreneurs.

Rules and Law: Limits in Complexity.

Degrees of Order: Balancing Rules, Freedom, and Uncertainty.

The Need for Uncertainty.

References.

Index.

O autorze

EDGAR E. PETERS is Chief Investment Strategist and Director of Systematic Asset Allocation for PanAgora Asset Management, a global investment management firm. He is a frequent lecturer on market theory and has taught investment and portfolio management at Babson College, Boston College, and Bentley College. He is the author of Chaos and Order in the Capital Markets and Fractal Market Analysis, as well as numerous articles in professional journals.

Blurb

Praise for complexity, risk, and financial markets

"A fascinating account of one of today′s great paradoxes: the irreducible uncertainty that lies at the heart of social and economic order. Ed Peters takes our most cherished beliefs, turns them upside down, and convinces us that they′re much better that way."– Ian Stewart, author of Does God Play Dice and columnist for Scientific American

"Is it any wonder why smart traders love volatility, while amateurs shun it? It′s because smart traders understand complexity theory. And with the help of Peters′ book, you may too!"– Desmond MacRae, The Street.com

"In reading previous contributions to the work of complexity and chaos theory, it′s obvious that the forerunners in these fields have been running too fast for the average reader...Peters knows what he is talking about and has done his homework, which makes this a good starting point for gaining insight into an economic paradigm shift bound to take place...[this book] is the real deal about complexity and chaos."– Thomas Stridsman, Futures Magazine

"...Peters always seems to provide compelling insight into how global structure and local randomness interact...the discussions regarding various process models and their implications for economic activity are worth the price of admission alone. Interested investors ought to check it out."– Alex Schay, The Motley Fool.com