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Article: Chaos under a cloud. (chaos theory's applicability to financial markets)
- Article from:
- The Economist (US)
- Article date:
- January 13, 1996
CopyrightCOPYRIGHT 1996 Economist Newspaper Ltd. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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PROFESSIONAL money managers always dream of finding a key to unlock the secrets of financial markets. In recent years they have been particularly intrigued by a body of mathematics known as "chaos theory"--in simple terms, the idea that complex and seemingly random outcomes might have very simple causes. Identifying these would allow fund managers to enrich their clients and themselves by predicting the movement of markets.
Many have now concluded that formal chaos theory has nothing practical to offer. As Ron Liesching, head of research at Pareto Partners, a quantitative fund-management firm, jokes: "The best way to make money out of deterministic chaos is to write ...