Fractal Shares

I would normally delete the Interactive Investment e-mail as spam, but a headline on the most recent one caught my eye- Benoit Mandelbrot on the mathematics of the market.

According to standard theory you would not expect to see a 6.8% fall in the Dow Jones Industrial Average in 100,000 years of trading says Mandelbrot in his book. It fell 6.8% on 31 August 1998. It also fell heavily on two earlier occasions that month (odds of all three: one in 500bn) and on 19 October 1987, just a decade earlier, it dropped 29%. The odds of that? “You could span the powers of ten from the smallest sub-atomic particle to the breadth of the measurable universe – and still never meet such a number.”

(The (mis)Behaviour of Markets – Benoit B. Mandelbrot, Richard L. Hudson)