Cassin
Senior Member
- Reaction score
- 78
Recipe for Disaster: The Formula That Killed Wall Street
- Thread starter Cassin
- Start date
ali777
Senior Member
- Reaction score
- 4
The article is too long for me :dunno: ... I watched Prof Niall Ferguson's Ascent of Money on telly, it's a really good documentary on the subject. Anyway, from what I saw in the article, one of the reasons of the failure of a static equation is the fact that the markets are not stable in long run. Prof Ferguson had a whole episode on this "herd mentality" of humans. Humans do not behave in a predictable way, little uncertainties that we are supposed to ignore or not make a big deal out of, can quickly turn into stampedes.
What I concluded from the documentary was that there has been lots of equations in the last 2 decades, but all of them ignored the fundamental aspect of finance, ie, they underestimate human behaviour. Reading this article makes me think that the industry didn't learn its lessons in the 90s and they made the same mistakes again....
What I concluded from the documentary was that there has been lots of equations in the last 2 decades, but all of them ignored the fundamental aspect of finance, ie, they underestimate human behaviour. Reading this article makes me think that the industry didn't learn its lessons in the 90s and they made the same mistakes again....
Old Baldy
Senior Member
- Reaction score
- 1
Yes, I read that Cassin. Good one IMHO.
Ali, 2nd Amendment nuts like me all call the "herds" sheeple (i.e., a word play on the word people)!
unk:
http://en.wikipedia.org/wiki/Sheeple
I hate to point this out Ali but you're young enough to see this all happen again I'm afraid to say.
Ali, 2nd Amendment nuts like me all call the "herds" sheeple (i.e., a word play on the word people)!
unk:http://en.wikipedia.org/wiki/Sheeple
I hate to point this out Ali but you're young enough to see this all happen again I'm afraid to say.
The Gardener
Senior Member
- Reaction score
- 25
Great piece, Cassin.
I'd personally have to echo the sentiment made by the first blog comment below the article, posted by "PractInv". This is not the first time this has happened. The infamous Long Term Capital Management firm imploded back in 1998, due to reliance on the Black Scholes quantitative model. This kind of event should NOT have been a surprise, we had several episodes that should have been a warning to us.... but as your piece says, when you're raking in the dough in the short term, why stop to ask questions?
I'd personally have to echo the sentiment made by the first blog comment below the article, posted by "PractInv". This is not the first time this has happened. The infamous Long Term Capital Management firm imploded back in 1998, due to reliance on the Black Scholes quantitative model. This kind of event should NOT have been a surprise, we had several episodes that should have been a warning to us.... but as your piece says, when you're raking in the dough in the short term, why stop to ask questions?