Why Stock Markets Crash : Critical Events in Complex Financial Systems. Professor Didier Sornette of UCLA has some very interesting things to say about stock markets. In his book, he explains how his "theory of cooperative herding and imitation [...] has detected the existence of a clear signature of herding in the decay of the US S&P500 index since August 2000 with high statistical significance, in the form of strong log-periodic components." Although his timing has been just a bit early, the theory, the predictions to date and the pictures are all pretty uncanny. This is easily the most interesting book on the stock market I have ever read and provides interesting and believable hypotheses about things I never imagined could have rigorous explanations. For an overview, here is an interview with the author.
posted by muppetboy on May 14, 2004 - 19 comments