Reading Books

When I worked in "The Beast" on "The Street" I had time to read when I was commuting on the plane (weekends) & train (midweek). Being "semi-retired" now, I finally have some time to read books again. So I thought I'd write about a few from time to time.

I recently finished "The (Mis)behavior of Markets" by Mandlebrot, the famous mathematician. [ lol, I had been trying to finish it for about two years. ] While somewhat interesting in it's examples, I thought the book dragged on & on. Maybe if one is going to try to model markets or develop systematic, rules-based trades, the book might provide some starting background. But basically the main point is that market return distributions are not governed by stationary Normal distributions over time and undue reliance on such will cause you to lose money. Mandlebrot doesn't expressly say it, but "news" matters and many of those non-Normal deviations are due to news events.

Mandlebrot spends a lot of time criticizing the Black-Scholes options model in a manner suggesting his criticisms are new, but Fischer Black himself taught us those limitations over 30 years ago in his class at MIT's Sloan School. I was there and have always remembered them.

Well, the book is worth reading if you have a quantitative side to learn some more depth on the types of distributions that market returns have; otherwise, you might skip.