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Chaos and Order in the Capital Markets: A New View of Cycles, Prices, and Market Volatility (Wiley Finance)

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Poorly explained
A very good introduction
A dated overview, with little real meat
Good overview, bad balance
Commit it to the flames

Chaos and Order in the Capital Markets: A New View of Cycles, Prices, and Market Volatility (Wiley Finance)
Edgar E. Peters
Manufacturer: Wiley
ProductGroup: Book
Binding: Hardcover

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Fractal Market Analysis: Applying Chaos Theory to Investment and Economics
The (Mis) Behavior of Markets: A Fractal View of Risk, Ruin And Reward
Complexity, Risk, and Financial Markets
Fractals and Scaling In Finance
Why Stock Markets Crash: Critical Events in Complex Financial Systems

ASIN: 0471139386

Book Description

The latest developments in chaos theory - from an industry expert

Chaos and Order in the Capital Markets was the first book to introduce and popularize chaos as it applies to finance. It has since become the classic source on the topic. This new edition is completely updated to include the latest ripples in chaos theory with new chapters that tie in today's hot innovations, such as fuzzy logic, neural nets, and artificial intelligence.

Critical praise for Peters and the first edition of Chaos and Order in the Capital Markets

"The bible of market chaologists." - BusinessWeek

"Ed Peters has written a first-class summary suitable for any investment professional or skilled investor." - Technical Analysis of Stocks & Commodities

"It ranks among the most provocative financial books of the past few years. Reading this book will provide a generous payback for the time and mental energy expended." - Financial Analysts Journal

This second edition of Chaos and Order in the Capital Markets brings the topic completely up to date with timely examples from today's markets and descriptions of the latest wave of technology, including genetic algorithms, wavelets, and complexity theory.

Chaos and Order in the Capital Markets was the very first book to explore and popularize chaos theory as it applies to finance. It has since become the industry standard, and is regarded as the definitive source to which analysts, investors, and traders turn for a comprehensive overview of chaos theory. Now, this invaluable reference - touted by BusinessWeek as "the bible of market chaologists" - has been updated and revised to bring you the latest developments in the field.

Mainstream capital market theory is based on efficient market assumptions, even though the markets themselves exhibit characteristics that are symptomatic of nonlinear dynamic systems. As it explores - and validates - this nonlinear nature, Chaos and Order repudiates the "random walk" theory and econometrics. It shifts the focus away from the concept of efficient markets toward a more general view of the forces underlying the capital market system.

Presenting new analytical techniques, as well as reexamining methods that have been in use for the past forty years, Chaos and Order offers a thorough examination of chaos theory and fractals as applied to investments and economics. This new edition includes timely examples from today's markets and descriptions of cutting-edge technologies-genetic algorithms, wavelets, complexity theory-and hot innovations, such as fuzzy logic and artificial intelligence.

Beyond the history of current capital market theory, Chaos and Order covers the crucial characteristics of fractals, the analysis of fractal time series through rescaled range analysis (R/S), the specifics of fractal statistics, and the definition and analysis of chaotic systems. It offers an in-depth exploration of:
* Random walks and efficient markets - the development of the efficient market hypothesis (EMH) and modern portfolio theory
* The linear paradigm - why it has failed
* Nonlinear dynamic systems - phase space, the Henon Map, Lyapunov exponents
* Applying chaos and nonlinear methods - neural networks, genetic algorithms
* Dynamical analysis of time series - reconstructing a phase space, the fractal dimension

Tonis Vaga's Coherent Market Hypothesis - the theory of social imitation, control parameters, Vaga's implementations

Plus, Chaos and Order now contains a Windows-compatible disk including data sets for running analyses described in the appendices.

Written by a leading expert in the field, Chaos and Order in the Capital Markets has all the information you need for a complete, up-to-date look at chaos theory. This latest edition will undoubtedly prove to be as invaluable as the first.

Customer Reviews:

Poorly explained.......2004-02-04

I have a university maths degree and found the book very obvious and drawn out for the first few chapters. In spite of this I looked forward to what was going to be explained later. Suddenly from a very simple and easy to understand explanation on the EMH he starts to use mathematics in his equations that I had a lot of difficulty following. There was very little or no explanation of how these equations were arrived at and a lot of mathematics and statisics is assumed. This book does not apply the theory in ny meaningful way to the markets let alone the capital markets in my opinion. I found that I took very little away from this book and would not recommend it to anyone who has basic mathematics like myself or is looking for some deeper insight into the markets. I would hate to have Mr Peters as a teacher based on his book.

A very good introduction.......2004-02-01

I read this book, the 1991 version, years ago. Around 1980 my own attempts to crack share prices statistically convinced me that all share prices behaved like a Gaussian random walk meaning that all speculation was comparable with playing roulette and I am not one of those guys who usually wins when gambling. This view was strengthened when the option pricing model came up, meaning that even the real pro's in the field assume that share prices are nothing but a random walk. This book has opened my eyes to the fact that there is much more to randomness than just the Gaussian curve. Share prices are not fully random. Impressive is the demonstration that an RS analysis on the real data is different when applying the same RS analysis on scrambled data. So there is information hidden in these time series, somewhere. Since then I have picked up the subject of cracking time series again with great pleasure. I think this book is exceptionally well written and without it I doubt if I would have been able to follow Mandelbrot's book "scaling and fractals in finance" that I bought later. The book is about understanding a subject, not about learning a simple formula to apply on a time series.

A dated overview, with little real meat.......2003-02-10

The second edition of this book was published in 1996. The book
seems to be largely based on Feder's 1988 book "Fractals". The
dated nature of this book means that it is missing later work
on long memory processes, which Peters estimates using the Hurst
exponent.

As one reviewer already noted, don't assume that this book will
provide much in the way of useful equations. For anyone who wants
more than an overview, this book is a disappointment. Peters does
a poor job of explaining the equations and I did not find enough
detail to implement the algorithms discussed (I turned to Feder's
book and various journal articles). The book does come with a
"floppy" disk containing the Visual Basic algorithms. This is
a poor choice, since C is pretty much the lingua franca for
algorithms.

The various chaos and fractal techniques are applied to a handful
of financial data sets, but this is far from even a solid
suggestion that these techniques might be useful to anyone
developing real market models.

Some of the conclusions that Peters draws (cycles in financial
data) do not seem to be supported the evidence he presents.

In summary, if you are looking for something beyond an overview,
save your money. Feder ("Fractals") has a better description of
RS calculation. "A Non-Random Walk Down Wall Street" by Lo
and MacKinlay has a chapeter on the application of the RS
statistic and long-memory processes which is much better than
Peters. For those who need to simulate fractal brownian motion
(data sets with a particular Hurst exponent) "The Science of
Fractal Images" by Barnsley et all is a good reference.

Good overview, bad balance.......2001-03-22

If you're looking for a purely conceptual introduction to how chaos theory can be applied to financial markets, this book is as good a source as any. Peters's discussion of R/S statistics and the graphical examples drawn from the markets are clear and intuitive (Ch. 7-8). The key point demonstrating long-term memory effects in the market is well made.

However he spends an inordinate amount of time attacking the foundations of the efficient market hypothesis (EMH) to the point of being boring, yet the argument boils down to "it has errors when compared to reality". Duh, so does every other theory, including fractal. The real issue is "for the error in theory A, how bad are the results X, and is theory B much better at it?" If you're not going to do that, don't spend 40 pages (Ch. 1-4) on it. This is misleading to those not familiar with EMH, and boring to those who are.

Don't look to this book for good math. In my edition (1991), careless and erroneous notations abound. Also, the equations are written in BASIC notation which is notoriously hard to visualize, but this is probably the fault of the editor/publisher. Peters makes frequent and unannounced jumps between the apparent rigor of math and loose conjectures. The math is distracting to a qualitative reader, and the conjectures irritating to the quantitative one. Better to cater to one audience, and do it well.

Still, I would recommend this book as a good conceptual introduction to the subject. But if you're planning to go deeper, use the equations in this book at your own perils. Go to the source.

Commit it to the flames.......2001-01-04

For those of you intrigued by chaos versus the financial markets, I would suggest you get the basic knowledge in Garnett P. Williams "Chaos Theory Tamed" (if you don't mind being explained in the first twenty chapters things like the laws of exponents and logarithms), or the Devaney books, for people with some maths. By the time you finish these honest, carefully and painstakingly written books, you will have a fair understanding of what chaos theory is about, and you will also see that while it is interesting stuff, it is hard to imagine it having any practical relevance to finance, since finance is the realm of stochastic, not deterministic phenomena.

Mr. Peters' readers will not have the chance of gaining such a perspective on chaos or on finance, alas. Mr. Peters hasn't produced a clear, comprehensible text, but rather a imprecise and frustrating piece, presumably written in a very short time, filled with a huge number of graphs having epsilon informational content. It is also full of conceptual mistakes - Mr. Peters most probably doesn't have a good grasp of what he's speaking about, but to be fair, it is hard to tell since the implicit message of the book is: "Hey, like I'm going to give out all my secrets...! Forget it, baby!", so the readers are never given all of the story. Readers therefore have to decide whether they believe that the author has found a meaningful and secret way to use chaos, that unfortunately will not be revealed, or whether the author should be put in the same category as those who write about Crystals or Financial Astrology.

Can smart people make profit with chaos theory? Certainly! However, the only way to do so is by writing books about it...

Book Description

Stochastic Volatility in Financial Markets presents advanced topics in financial econometrics and theoretical finance, and is divided into three main parts. The first part aims at documenting an empirical regularity of financial price changes: the occurrence of sudden and persistent changes of financial markets volatility. This phenomenon, technically termed `stochastic volatility', or `conditional heteroskedasticity', has been well known for at least 20 years; in this part, further, useful theoretical properties of conditionally heteroskedastic models are uncovered. The second part goes beyond the statistical aspects of stochastic volatility models: it constructs and uses new fully articulated, theoretically-sounded financial asset pricing models that allow for the presence of conditional heteroskedasticity. The third part shows how the inclusion of the statistical aspects of stochastic volatility in a rigorous economic scheme can be faced from an empirical standpoint.

Customer Reviews:

Compact And a little profound.......2001-06-09

Just as the title, it is a compact book and not so easy to read. It is a technic book for us to understand how to measure the volitility in the financial market.It takes me a lot of time to read this one.I think it would be better for people to know a little stochastic calculus at first and then try to read it.... It is a good book I think and suits for the one who wants to know the topic more deeply.

Volatility in the Capital Markets: State Of-The-Art Techniques for Modeling, Managing and Trading Volatility (State of-the-Art Techniques for Modeling, Managing and Trading Volatility)

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Note: editor

Volatility in the Capital Markets: State Of-The-Art Techniques for Modeling, Managing and Trading Volatility (State of-the-Art Techniques for Modeling, Managing and Trading Volatility)
Israel Nelken
Manufacturer: Eric Dobby Publishing
ProductGroup: Book
Binding: Hardcover

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ASIN: 1888998059

Book Description

No subject is more critical to financial professionals than volatility. Traders, researchers, risk managers, and anyone involved in the derivatives markets will find a wealth of insights and practical applications in this breakthrough book. Specific topics include:

Practical Issues Concerning Volatility and Its Measurements, Past and Predicted
Option Pricing and Volatility
Simple Formulas to Compute Accurate Implied Volatilities
Volatility of What?
Delta Hedging with Uncertain Volatility
The Effects of Double-Barrier Options on Foreign Exchange Markets
The Relationship Between Cap Volatilities and Swaption Volatilities
Volatility and Calibration in Interest Rate Models
Integrated Volatility-Based Risk Management
Software: Exotic Options Portfolio Manager

Customer Reviews:

Note: editor.......2004-01-25

Nelken is the editor of this book, for which read, he has collated the material. There is not a coherent developing thread, it is just a mis-mash of articles about volatility. At least two of the chapters have results that are demonstrably incorrect.

Financial Innovations and Market Volatility

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Financial Innovations and Market Volatility
Merton H. Miller , and Alexander Miller
Manufacturer: Blackwell Publishing Limited
ProductGroup: Book
Binding: Hardcover

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Trading Options on Futures: Markets, Methods, Strategies, and Tactics

ASIN: 1557862524

Intra- and inter-regional spillovers between emerging capital markets around the world [An article from: Research in International Business and Finance]

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Intra- and inter-regional spillovers between emerging capital markets around the world [An article from: Research in International Business and Finance]
B. Gebka , and D. Serwa
Manufacturer: Elsevier
ProductGroup: Book
Binding: Digital

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ASIN: B000PKI282

Book Description

This digital document is a journal article from Research in International Business and Finance, published by Elsevier in 2007. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
In this paper, returns and volatility spillovers between emerging capital markets of Central and Eastern Europe, Latin America, and South-East Asia are investigated. We distinguish between spillovers from countries located in one region (intra-regional) and in different regions (inter-regional) after controlling for shocks originating at home and on the global market. Both intra- and inter-regional spillovers are significant, with the former being more pronounced than the latter. Our findings indicate that linkages between emerging markets are not solely due to their common dependence on the global capital market and highlight the importance of common factors in intra-regional interdependencies.

The volatility spiral. (Corporate Finance): An article from: Chief Executive (U.S.)

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The volatility spiral. (Corporate Finance): An article from: Chief Executive (U.S.)
Joel Kurtzman
Manufacturer: Chief Executive Publishing
ProductGroup: Book
Binding: Digital
ASIN: B00093HQIW
Release Date: 2005-07-28

Book Description

This digital document is an article from Chief Executive (U.S.), published by Chief Executive Publishing on January 1, 1995. The length of the article is 895 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available in your Amazon.com Digital Locker immediately after purchase. You can view it with any web browser.

From the supplier: The world's capital markets follow what former German Chancellor Helmut Schmidt terms a floating non-system that is prone to volatility. This non-system is very dangerous because it is highly sensitive to economic and financial information, and it involves huge amounts of money, with the foreign exchange market alone moving over $1 trillion a day. Sudden movements of such large amounts of money can throw markets or stocks into chaos. The floating non-system was created largely by dropping transaction costs and easier access to information due to the availability of new financial software packages. These two factors have combined to make it much easier for investors to enter into transactions. Since the highly volatile system cannot be stabilized by such measures as central bank intervention or the imposition of a transaction tax, companies must persist in exploring ways of influencing it.

Citation Details
Title: The volatility spiral. (Corporate Finance)
Author: Joel Kurtzman
Publication: Chief Executive (U.S.) (Magazine/Journal)
Date: January 1, 1995
Publisher: Chief Executive Publishing
Issue: n100 Page: p70(1)

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Exchange Rate Volatility, Trade, and Capital Flows under Alternative Exchange Rate Regimes (Japan-US Center UFJ Bank Monographs on International Financial Markets)

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Exchange Rate Volatility, Trade, and Capital Flows under Alternative Exchange Rate Regimes (Japan-US Center UFJ Bank Monographs on International Financial Markets)
Piet Sercu , and Raman Uppal
Manufacturer: Cambridge University Press
ProductGroup: Book
Binding: Hardcover

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ASIN: 0521562945

Book Description

Recent years have seen a substantial increase in the volatility of exchange rates. This trend has prompted economists and finance analysts to question if the observed behavior of exchange rates is consistent with a rational model. Does that volatility, further, hinder trade? Professors Sercu and Uppal examine these issues in the context of dynamic general equilibrium models, explicitly considering the role of financial markets while allowing for commodity markets to be segmented across countries. They show that the implications of the theoretical model for exchange rates in this context are quite different from those put forth by monetary theorists and proponents of purchasing power parity arguments.

Volatility and Credit Risk in the Capital Markets: Assessing and Managing Financial Instrument Risk and Off-Balance Sheet Operations

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Volatility and Credit Risk in the Capital Markets: Assessing and Managing Financial Instrument Risk and Off-Balance Sheet Operations
Erik Banks
Manufacturer: Probus Professional Pub
ProductGroup: Book
Binding: Hardcover

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Partial market value accounting, bank capital volatility, and bank risk (Finance and economics discussion series)

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Partial market value accounting, bank capital volatility, and bank risk (Finance and economics discussion series)
Mark S Carey
Manufacturer: Division of Research and Statistics, Division of Monetary Affairs, Federal Reserve Board
ProductGroup: Book
Binding: Unknown Binding

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ASIN: B0006PAT8W

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NBER working paper series
Philippe Bacchetta
Manufacturer: National Bureau of Economic Research
ProductGroup: Book
Binding: Unknown Binding

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ASIN: B0006QWV00

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