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A multifractal walk down wall street pdf6/12/2023 An inescapable analogy is that of a sailor at sea. But the picture it presents does not reflect reality, if one agrees that major events are part of the remaining 5 percent. It is true that portfolio theory may account for what occurs 95 percent of the time in the market. The mathematics underlying portfolio theory handles extreme situations with benign neglect: it regards large market shifts as too unlikely to matter or as impossible to take into account. A cornerstone of finance is modern portfolio theory, which tries to maximize returns for a given level of risk. The classical financial models used for most of this century predict that such precipitous events should never happen. In a reversal, the stock shot up 10 percent on the fourth day. Last September, for instance, the stock for Alcatel, A French telecommunications equipment manufacturer, dropped about 40 percent one day and fell another 6 percent over the next few days. Fortunes are made and lost in sudden bursts of activity when the market seems to speed up and the volatility soars. ![]() Mandelbrot Individual investors and professional stock and currency traders know better than ever that prices quoted in any financial market often change with heart-stopping swiftness. ![]() 1 A Multifractal Walk Down Wall Street "The geometry that describes the shape of coastlines and the patterns of galaxies also elucidates how stock prices soar and plummet." by Benoit B.
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