Re: Article in Worth magazine...

From: John Conover <>
Subject: Re: Article in Worth magazine...
Date: Sat, 22 Mar 1997 12:05:21 -0800

Rick McGeer writes:
> By  the way, there's an interesting article in this month's Worth magazine
> on SFI.  Interesting perspective on why fractal analysis predicts the
> market.
> Essentially (the claim is) a market composed of traders imbued with liberal
> amounts of fear and greed, and incomplete information, will produce a
> fractal market.

[4] goes into the formal arguments in depth, with intuitive
examples. As pointed out by Arthur[1], "... [these systems] become
self-referential and deductively indeterminate. This indeterminacy
pervades economics and game theory." [2] should be required reading
for anyone in industry, because it is argued that industrial markets
are fractal, as is all business, as argued in[3], as is the economy in
general, as argued in[5].

The tsinvest program works just fine operating on P&L data, the US
GDP, or semiconductor market growth/dynamics, as well as equity


If you want to persue it further, much of Brian Arthur's work is on line:

    [1] W. Brian Arthur.  "Complexity in Economic and Financial
    Markets."  Complexity, 1, pp. 20-25, 1995.  Also available from, February 1995.

    [2] W. Brian Arthur. "Competing Technologies, Increasing Returns,
    and Lock-In by Historical Events."  Econ Jnl, 99, pp. 106-131,
    1989. Also available from, Jun,

    [3] W. Brian Arthur. "Increasing Returns and the Two Worlds of
    Business."  To appear in Harvard Business Review, July-Aug., 1996,
    under the title "Increasing Returns and the New World of
    Business," forthcoming. Also available from", Apr, 1996.

    [4] W. Brian Arthur.  "Inductive Reasoning and Bounded
    Rationality."  Amer Econ Rev, 84, pp. 406-411, 1994. Session:
    "Complexity in Economic Theory", chaired by Paul
    Krugman. Available from

    [5] W. Brian Arthur.  "Positive Feedbacks in the Economy",
    Scientific American, Feb. 1990. Also available from, Nov, 1989.

And, while you are at, pick up:

    [6] William A. Brock and Pedro J. F. de Lima. "Nonlinear time
    series, complexity theory, and finance."  To appear in "Handbook
    of Statistics Volume 14: Statistical Methods in Finance," edited
    by G. Maddala and C. Rao.  New York: North Holland, forthcoming.
    Also available from, March

which is a survey of fractal and chaotic methodologies used in
analyzing financial time series. Everyone has their favorite, and it
is turning into a botany of concepts, methods and approaches.


John Conover,,

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