From: paul@fatmans.demon.co.uk
Date: Fri, 11 Apr 1997 07:56:57 -0700 (PDT)
To: Bill Stewart <stewarts@ix.netcom.com>
Subject: Re: "...markets are fundamentally chaotic, not efficient"?
Message-ID: <860759798.116769.0@fatmans.demon.co.uk>
MIME-Version: 1.0
Content-Type: text/plain



> By that definition, markets, whether for capital or assassins, 
> are distinctly _not_ chaotic*, since most people's decisions
> 	[* Unless Life, The Universe, and Everything are really
> 	deterministic, but fate has decreed that I don't believe that...]
> about what stocks to buy/sell, and particularly the timing,
> are influenced by lots of random events - when they hear what information,
> whether they were busy doing something else when they heard, 
> whether they'd just blown their disposable income on a new car
> because that freak windstorm dropped a tree on their car the same
> week the Post Office ate their car insurance payment, 
> whether Alan Greenspan had a bad pizza the night before the quarterly 
> interest rates came out or too much caffeine before his latest speech....


I don`t really want to get into this discussion/flame war too deeply 
but I will post on this thread once...

Any of the events described above are completely determined by the 
initial conditions of the system, just because a system is too 
complex for us to measure its initial conditions in enough detail 
does not mean it is random, it simply means we see it as random. 
Hence a market`s behaviour is labeled chaotic, because it appears 
random. It is, however, completely deterministic however we cannot 
know the initial conditions because they are too complicated. 

End of chat, chaotic behaviour is NOT random, it simply appears so 
unless one can accurately measure the intial conditions.


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