A Mathematician Plays the Stock Market

A Mathematician Plays the Stock Market

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by John Allen Paulos
     
 

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ISBN-10: 0465054811

ISBN-13: 9780465054817

Pub. Date: 05/03/2004

Publisher: Basic Books


In A Mathematician Plays the Stock Market best-selling author John Allen Paulos demonstrates what the tools of mathematics can tell us about the vagaries of the stock market. Employing his trademark stories, vignettes, paradoxes, and puzzles (and even a film treatment), Paulos addresses every thinking reader's curiosity about the market: Is it efficient

Overview


In A Mathematician Plays the Stock Market best-selling author John Allen Paulos demonstrates what the tools of mathematics can tell us about the vagaries of the stock market. Employing his trademark stories, vignettes, paradoxes, and puzzles (and even a film treatment), Paulos addresses every thinking reader's curiosity about the market: Is it efficient? Is it rational? Is there anything to technical analysis, fundamental analysis, and other supposedly time-tested methods of picking stocks? How can one quantify risk? What are the most common scams? What light do fractals, network theory, and common psychological foibles shed on investor behavior? Are there any approaches to investing that truly outperform the major indexes? Can a deeper knowledge of mathematics help beat the odds?All of these questions are explored with the engaging erudition that made Paulos's A Mathematician Reads the Newspaper and Innumeracy favorites with both armchair mathematicians and readers who want to think like them. Paulos also shares the cautionary tale of his own long and disastrous love affair with WorldCom. In the tradition of Burton Malkiel's A Random Walk Down Wall Street and Jeremy Siegel's Stocks for the Long Run, this wry and illuminating book is for anyone, investor or not, who follows the markets-or knows someone who does.

Product Details

ISBN-13:
9780465054817
Publisher:
Basic Books
Publication date:
05/03/2004
Edition description:
Reprint
Pages:
216
Sales rank:
727,442
Product dimensions:
5.30(w) x 7.96(h) x 0.60(d)

Table of Contents

1Anticipating Others' Anticipations1
Falling in Love with WorldCom
Being Right Versus Being Right About the Market
My Pedagogical Cruelty
Common Knowledge, Jealousy, and Market Sell-Offs
2Fear, Greed, and Cognitive Illusions13
Averaging Down or Catching a Falling Knife?
Emotional Overreactions and Homo Economicus
Behavioral Finance
Psychological Foibles, A List
Self-Fulfilling Beliefs and Data Mining
Rumors and Online Chatrooms
Pump and Dump, Short and Distort
3Trends, Crowds, and Waves37
Technical Analysis: Following the Followers
The Euro and the Golden Ratio
Moving Averages, Big Picture
Resistance and Support and All That
Predictability and Trends
Technical Strategies and Blackjack
Winning Through Losing?
4Chance and Efficient Markets57
Geniuses, Idiots, or Neither
Efficiency and Random Walks
Pennies and the Perception of Pattern
A Stock-Newsletter Scam
Decimals and Other Changes
Benford's Law and Looking Out for Number One
The Numbers Man-A Screen Treatment
5Value Investing and Fundamental Analysis85
e is the Root of All Money
The Fundamentalists' Creed: You Get What You Pay For
Ponzi and the Irrational Discounting of the Future
Average Riches, Likely Poverty
Fat Stocks, Fat People, and P/E
Contrarian Investing and the Sports Illustrated Cover Jinx
Accounting Practices, WorldCom's Problems
6Options, Risk, and Volatility117
Options and the Calls of the Wild
The Lure of Illegal Leverage
Short-Selling, Margin Buying, and Familial Finances
Are Insider Trading and Stock Manipulation So Bad?
Expected Value, Not Value Expected
What's Normal? Not Six Sigma
7Diversifying Stock Portfolios141
A Reminiscence and a Parable
Are Stocks Less Risky Than Bonds?
The St. Petersburg Paradox and Utility
Portfolios: Benefiting from the Hatfields and McCoys
Diversification and Politically Incorrect Funds
Beta-Is It Better?
8Connectedness and Chaotic Price Movements163
Insider Trading and Subterranean Information Processing
Trading Strategies, Whim, and Ant Behavior
Chaos and Unpredictability
Extreme Price Movements, Power Laws, and the Web
Economic Disparities and Media Disproportions
9From Paradox to Complexity187
The Paradoxical Efficient Market Hypothesis
The Prisoner's Dilemma and the Market
Pushing the Complexity Horizon
Game Theory and Supernatural Investor/Psychologists
Absurd Emails and the WorldCom Denouement
Bibliography203
Index205

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A Mathematician Plays the Stock Market 5 out of 5 based on 0 ratings. 1 reviews.
LOTONtech More than 1 year ago
I really like this book, and you might too, if you treat it as what it is -- a series of (usually amusing) observations and anecdotes about how stock prices change as a result of peoples perceptions about how stock prices change.

Here are some of the gems:

ON GREED: The guy who found a $5 casino chip, and through a series of bets built up a multi-million pound fortune; then lost it all on the final spin of the wheel, and when reporting back to his wife said that he had "only lost $5".

ON FUNDAMENTALS: Worldcom had an extremely low P/E (which we would naively assume to be a good thing) just before going bankrupt.

Paulos draws mathematical analogies occasionally, but not as often as you might think from the title. It is very accessible to non-mathematicians; who can take the examples at face value, laugh at them, and try to learn something from them.

This book won't make you rich, but it will make you think -- and laugh.