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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? IsIn 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....

Title : A Mathematician Plays The Stock Market
Author :
Rating :
ISBN : 9780465054817
Format Type : Paperback
Number of Pages : 224 Pages
Status : Available For Download
Last checked : 21 Minutes ago!

A Mathematician Plays The Stock Market Reviews

  • James
    2019-04-17 11:17

    Somewhat entertaining, but about half the book is anecdotes that have been published many many times by many others.That leaves about 101 pages that are original. I think he makes a number of mistakes in trying to understand the stock market.P64 He compares stock prices to flipping a coin,a coin has no memory or emotion,stock prices behave very differently.p127 He says Fed regulations require that the amount you owe your broker be no more than 50% of total market value of your holdings. Not true, the day you borrow the money, the most you can borrowis 50%, but if your stocks go down you don't get a margin calluntil your equity is 30-35% of total value,and the margin call doesn't require you to get back to 50%,usually it's 40%. Different stock brokers have slightly different rules,but none are like what he describes.He interjects standard deviation a number of times.SD and the bell curve work great with human attributeslike IQ and height,But not with stock returns.Plotting stock returns, the tails are much fatter than theusual bell curve, and there are a lot more data points nearthe mean.p157 he says risk is volatility,ridiculous,High volatility is my friend,it allows me to buy low and sell high much more often thanwhen volatility is low.Risk is too much debt, or stock options that lead management to go for double or nothing strategies. Or your broker changing policies and demanding that you comply now or they will take action without your permission. Also political meddling, nationalization, changes in tax laws,government policies that favor the mania of the day likewhat surrounds the current debate about greenhouse gases and whether recent warming is the result of burning carbon fuels or natural fluctuation that has gone on for millions of years. Did humans cause the ice ages?Of course not, but no one knows what the cause was,just that the earths temperature has always fluctuated.A lot, and frequently.p 158 he says investors can always borrow at the risk-free interest rate. I don't know what he means by this,but I know I can't borrow from any one at the same rate the US Treasury can. That's what most people think of when talking about risk-free interest.p 183 he rants about drug companies not looking for drugs that'll curepoor people in poor countries. Gee, does it have anything to do with the fact these countries don't respect patents or contribute anything to research?He also rants about the richest 1% owning 50% of all stocks.So Warren Buffett is worth about $50 Billion,so what? He has lived in the same modest house for more than 50 years,drives an old car,and thinks a hamburger and fries is a great dinner. He has created over $200 Billion dollars of wealth for himselfand others and spends almost none of it on himself. And when he dies his wealth wont' disappear.Personally I divide people into 2 categories,1. those that produce more than they consume,2. and those that consume more than they produce. People in cat 1 make the world richer for all of us.People in cat 2 are parasites.That includes trophy wives that spend ungodly amounts of moneyon clothes and other junk. And also welfare queens who may be poor, but produce nothing,only draining wealth away from people who do work.Jackie O often spent $400,000 dollars in today's money shoppingyet never did any real work.

  • Alex Lee
    2019-04-08 15:04

    What's really interesting about other people's reviews of this book is that they seem to expect a book on the stock market from a mathematician to be somehow be based in finance.There are plenty of books on the stock market out there... that do so from a finance point of view.This book is pretty brilliant although at first glance, it appears to be pretty straight forward... you think a mathematician would use his knowledge about math to somehow find some brilliant trick about the stock market. But that's not how this plays out.Math is a game of numbers. It's a field of study that looks at patterns. But ultimately the numbers are a measurement, some kind of metric. What's faulty about using the stock market from a pure numbers point of view is that the numbers in stock prices need to measure the a consistent value for any math relation to work. What I mean is simply that stock prices are based on what people do in terms of trading volume of a stock. Abstract all you like, but the immediate particular reason why anyone does what they do with stock is anyone's guess.We can assume that a change in stock prices has to do with an anecdote on the news about a company, or something happening somewhere related to a company. But that's not always true. Sometimes things happen for seemingly no reason. Much of this, Paulos tries to explain has as much to do with how people perceive the market as much as it has to do with actual values. The later chapters are particularly brilliant on this account. The earlier chapters which seemed to promise this or that mathematical model, or this or that economic model... don't pan out because as Paulos convincingly tells us, any model that we use to predict the stock market can be outdated unless the model itself anticipates how others will use it, made predictions and how those predictions will affect the market. In other words, any stock market model needs to also be self reflexive in how it's applied -- not just when it's applied.Paulo makes some pretty complex abstractions to do this; for instance, applying how the "Efficient Market Hypothesis" is either always correct (when people believe it to be wrong, thus playing the stock market off of information in the news, or about a company's state) or it is always incorrect (when other people believe the information on the news is invalid as the stock prices already reflect the current value of the stock)... that is to say that particular hypothesis doesn't work as it should because it takes for its model an absolute system of values based on how other people act. People don't do things as mechanisms do; people evaluate based off of what they believe others will do as well.This twist of self reflexivity makes it particularly difficult to formulate any theory that is both consistent (non-contradictory) and complete... in essence, we need to formulate a model that can predict how its predictions are taken into account and then provide us with "a few steps ahead" so that profit can be captured. That would be a pretty sophisticated theory; and in fact be impossible because that theory could only work in the case of the one individual who has it. By definition the same theory could not with all the other individuals who also have it, otherwise there would be no profit!So a quick conclusion is that the market can at times reflect real values, but often it doesn't because there's too much white noise as meanings, theories, trends and news all impact the same metric. So how can we make any consistent model on the stock market if all this information flies under the same metric as the very metric a stock price is supposed to represent?This is all of course, extracted from the book. What I found really interesting, if one read between the lines from the get go, was that one can always take the meaning of a stock's movement anyway one likes. That is to say, we have an abundance of narratives that can fit the model of "what really happens". We simply pick the one we like the best, and go forth as if that were true. As Paulo points out, even through random chance a few individuals are bound to hit it big. And once people notice that, they will follow that person's movements, ensuring that they will always be right.Thus, the modeling of stocks, properly considered, must also model how we think as well. But that's nothing new. Paulo is of course, writing this book as a lament of his own failed investments...and in the process of doing so, he's also somewhat justifying the bubble bursting was inevitable, a kind of normal market behavior. But he's correct; the uncertainty in the stock market is not just an uncertainty as to what the price means, but similarly that its certainty is also a reflection of what we all would also believe it to mean.All in all, I found the book to be really entertaining and interesting. I would have liked a little more direction midway through the book... with each theory or direction Paulo brought up, he quickly shot it down at the end of the chapter. Of course, he was setting this bed of failed theories for the self reflexive analysises... but I didn't see it coming. So it felt much like wandering, and that's not a good way to treat your reader as it throws your reader out of the process of reading.

  • Runnig
    2019-04-18 14:16

    Entertaining but not really enlightening

  • Remo
    2019-04-20 16:10

    John Allen Paulos [JP] es un matemático que ha escrito fantásticos libros de divulgación de las matemáticas, que recomiendo en bloque. Si encuentran alguno, léanlo. No se arrepentirán. En los 90, JP fue una más de las víctimas de las puntocom. Su experiencia al quedar casi arruinado le llevó a escribir este libro, en el que da un impresionante repaso al mundo de la bolsa, su funcionamiento y las tripas matemáticas que subyacen a la cotización de los valores y las estrategias de inversión. JP escribe muy bien. Los conceptos que explica son a veces muy, muy complejos, y sin embargo sale airoso cada vez. Le admiro muchísimo. Además, escoge temas que a mí personalmente me parecen muy interesantes. Lo tiene todo. En el libro aprenderemos sobre conceptos como el efecto ancla, realmente sorprendente: Imaginemos un experimento en el que nos preguntan por un número que no sabemos. Por ejemplo, la población de Uzbekistán. En principio no sabemos qué decir, pero entonces el examinador dice: a ver, ¿es más o menos de 100 millones?. A otro grupo, el examinador les hace la misma pregunta, pero en vez de decir 100 millones dice 1 millón. La media de la gente a la que el examinador les sugirió 100 millones anda por los 60 millones, mientras que la media de los que recibieron la sugerencia de 1 millón ronda los 5 millones. O sea, que nos dejamos influir por una cifra cuando intentamos estimar otra. Se podría alegar que la gente se dejaba influir por la estimación del experimentador porque suponen que él lo sabe y nosotros no, así que partiendo de su suposición tiramos hacia donde a nosotros nos parece que está la respuesta correcta. Pues no. El experimento se repitió, pero, en vez de una sugerencia del experimentador, ¡se hizo girar una ruleta! La ruleta tenía cifras: 1 millón, 5 millones, 10 millones, 50 millones, 100 millones… Se preguntaba la población de Uzbekistán y se hacía girar la rueda. Las medias de la respuesta de cada grupo estaban sorprendentemente cerca del resultado que había salido en la ruleta en cada ocasión. Impresionante. Lo mismo, dice JP, ocurre cuando vamos a comprar acciones ( o nos hacemos una hipoteca a tipo variable). Si al comprar las acciones éstas están a 60 euros, inconscientemente tomaremos este valor como la “media” de las acciones, de modo que si están por encima estarán bien y si están por debajo estarán mal. Yo hice mi hipoteca con el euribor al 2,1%, más o menos, o sea que ahora que está al 4 lo veo como muy alto. Sin embargo, mirando el euribor de los últimos 20 años, veo que un 4% es bastante bajo (cosa que a la vez me incomoda y me asusta).Otra cuestión: los sesgos. Nos sentimos más culpables si perdemos dinero por culpa de la acción que por culpa de la inacción. o sea, que si compramos algo y baja nos sentiremos peor que si no lo vendemos y baja, a pesar de que el dinero perdido en cada ocasión será el mismo. En el libro nos cuenta un par de experimentos para reafirmar el concepto. Escondido en la página 26 encontramos un bello aforismo: El psicoanálisis es una enfermedad para la que él mismo se postula como cura.Y también hay una interesante reflexión sobre el concepto de horizonte de complejidad: los seres humanos dejamos de interesarnos por acontecimientos distantes en el futuro, aunque sean muy importantes. Como ejemplo pone una historia estupenda:Nos encontramos con una lámpara maravillosa, que dentro tiene un genio que nos concederá todo aquello que queramos con una condición: Es necesario ofrecer un dinero por la lámpara, Y hay que venderla tras obtener nuestros deseos por un precio estrictamente menor que el que pagamos. ¿Qué precio ofrecerían, estimados lectores, por la lámpara? Está claro que no podemos ofrecer un céntimo de euro, porque después no podríamos vendérsela a nadie por menos (no valen los medios céntimos ni divisas extranjeras con valores inferiores). Tampoco podemos ofrecer dos céntimos, porque tendríamos que venderla por un céntimo y nuestro futuro comprador no la podría vender, por lo que no la querría comprar. Tampoco podríamos venderla por tres céntimos, porque nuestro comprador se encontraría con que su comprador no podría venderla, y así él no podría venderla, por lo que no nos la compraría… En realidad, siguiendo la cadena, no hay ningún precio por el cual podamos estar seguros de comprarla y luego venderla. Y sin embargo, estamos todos de acuerdo, creo, en que la compraríamos por mil euros. ¿En qué punto deja de importarnos la cadena de compraventas que decide si podremos vender la lámpara o no? Los ecologistas sostienen que algo parecido nos pasa con la conservación del Medio Ambiente: estamos todos de acuerdo en que si seguimos así lo dejaremos todo hecho un desastre, pero como falta mucho y aún hay arbolillos y campos y playas ríos, pues no hacemos todo lo que podríamos. El libro es fantástico. Tiene partes complejas, pero bien solventadas por el autor, al que, repito, admiro por la simplicidad de sus explicaciones. Me lo he pasado pipa leyendo y encima he aprendido un montón (por así decirlo) sobre economía y bolsa. Es una lectura que merece la pena. Algunas partes requieren esfuerzo por parte del lector, pero es porque los conceptos de debajo son realmente revirados. De regalo, el libro contiene un guión cinematográfico sobre un tipo que sabe matemáticas y unos cuantos chascarrillos que seguro les sacarán una sonrisa. Completito.Mi nota: Imprescindible.

  • Cedric
    2019-03-26 13:56

    I had some insights, but not surprising being a complete layman in the field. Not recommended if you already know something about the stock market, and definitely not if you can't stand it that basic mathematical and statistical facts and calculations are being drawn out endlessly.

  • Sharly
    2019-04-14 12:02

    Tiene algunos capítulos muy buenos, explicando de manera sencilla conceptos básicos del mercado ( o teorías por las cuales le han dado el Nobel a economistas). Otros capítulos requieren una base en estadística, pero aunque la tengas no están tan bien explicados ( en la propia wikipedia puedes encontrar definiciones y ejemplos más claros).En general un libro agradable de leer e interesante si te gusta el tema.

  • Anthony Faber
    2019-03-25 16:58

    A lot of the same material as in "Innumeracy", but with examples drawn from his failed investment in WorldCom.

  • Anil Bhat
    2019-04-20 16:11

    this book was more about trading psychology than mathematics.

  • Michael Quinn
    2019-04-14 15:18

    Wow. What a weird book.Paulos seems to be writing a glorified journal, since the only suitable audience for this book are people exactly like Paulos before he began heavily investing in Worldcom. Who else would both like math enough to want read a book about it and have almost no knowledge of basic financial theory at the same time? The two worlds seem so closely related that it's hard to imagine someone that is interested in one field yet hasn't really learned much about the latter.And the financial theory in the book is definitely basic. It's essentially the same material that any student would encounter during their very first introduction to finance class. We have summary statistics for assessing performance, portfolio optimization, future and present value, technical indicators, financial statement analysis, and a very simple introduction to options, which does little more than defining calls and puts. Paulos is kind enough to include the math behind these ideas, but his subjects are so broad that the treatment is inevitably very shallow.In between these sections is a smattering of asides and observations, many of which have only the most tangential connection to each other or the ideas in the more concrete sections of the book. Of course, this includes a very detailed history of Paulos and his relationship to Worldcom. But beyond that, things start to get really bizarre. At more than a few points in the book, I had to ask myself how Paulos thought that this section was related to a mathematical understanding of the stock market. This is true of many of the political statements, some of his jokes and a lot of the leaps into material that he admits covering more thoroughly in other books. The longest section in the book is a film treatment about a mathematician that stretches the meaning of the word relevance to its breaking point.Stripping away most of the filler, there is at least a handful of decent ideas, even if all of them are not particularly novel. The paradoxes of individual agents within the EMH is quite fun, especially since for the EMH to be valid, there has to be a lot of people who believes that the EMH is false. He also has some decent extensions of the prisoner's dilemma to the stock market, and he shows how just the interactions between competing agents is often enough to develop financial turbulence.But that's it, and these few flashes of insight are not enough to justify the existence of this book. At times it feels like Paulos simply slapped all of this together to make up for his bad investment decisions. People interested in the subject will find much more valuable reads in the book's index (which includes Mandelbrot and Taleb), than in the actual book itself.

  • Jared
    2019-04-13 13:07

    Paulos is a witty and brilliant mathematician whose understanding of the stock market proves that he doesn’t understand finance like he does partial differential equations. He writes about an affair he had with WorldCom stock during the demise of its stock—losing the greater portion of his portfolio. There is an important lesson to be learned by our friend John Paulos’ mistake: risk management is what trading and investing is all about. In general finance theory (which Paulos should enroll in over at Temple University) there is no reward for taking on firm-specific risk. That is exactly why Paulos lost so much money—and hopefully made some of it back with this latest book of his. Firm-specific risk, also called systematic risk, is why any good analyst and portfolio manager screams diversification; but most of the time no one listens. Fortunately, Paulos intuitively understands this when he recommends index funds at the close of his book, but makes no real attempt to explain the theories behind it. Behavioral finance, this is obviously what fascinates Mr. Paulos. He cites many examples of how the markets are inefficient, which can be explained by behavioral finance—people’ emotions get mixed up in their heads. Remember that this phenomenon is much more relevant to individual investors than it is to fiduciaries (that reason alone is good reason to consider letting other people manage your money). To give you a taste of Paulos’ humorous and cynical attitude toward the markets, he writes, “How many efficient market theorists does it take to change a light bulb? Answer: None. If the light bulb needed changing the market would have already done it!”Where he lacks in substance, Paulos makes up for it in writing. He will make you laugh out loud while you read—especially if you are a victim to his kind of stock obsession. So if you are looking for a clever book on how he (and maybe you) lost a ton of dough, read it; but please, don’t go to John Paulos for any advice on how to invest.

  • Sammy
    2019-04-07 13:09

    Light and entertaining. Takes a look of the stock market from a mathematician point of view (He specialty is in probability and logic.)I recommend it to anyone who want a beginner's guide to pricing equities. The main advantage is that the author consulted some academic sources. Topics such as technical analysis (voodoo), fundemental analysis (Buffet Watch), Modern Porfolio Theory (Greek for geeks), and chaos theory (butterflys).I didn't like the fact that the author sometimes goes on long tangents unrelated to the topic. He has a complete obsession to the WorldCom stocks he lost a bunch of money on -- in fact the book is almost an elegy to his WorldCom losses. He also had a bunch of random stuff that a better editor should have greened. He devoted several pages to an imaginary moviescript he wanted to write about a mathematician turned con artist. The reader is also privy to his personal life: he lied to his wife about money, he buys books at Borders and invests with Swzarb.In either case, a good primer, if it weren't so random.

  • Steve
    2019-03-31 17:56

    Nothing groundbreaking but nevertheless worthwhile and engaging to the end despite it having been written twelve years ago. But it's interesting to read that even back then the author raised concerns about economic and social disparity – his premonitions proved to be correct. Don't expect to find the secret to successful investing here. It's the story of a fellow traveler peppered with some light math theory and a few perhaps timeworn anecdotes, but it kept me reading to the end, which says a lot.

  • Raja99
    2019-04-05 15:55

    I find Paulos to be very readable, if not incredibly well organized. The major reason I liked this book was that I got to learn about a lot of rival--and antithetical--theories of the stock market and how to make (and lose) money on it. I confess that I find one popular idea--that the market is perfectly efficient and incorporates all information with no time lag--to be almost laugh-out-loud funny; perhaps we could use its amazing computational powers to solve other intractable problems :-P(I'm not sure exactly which day I finished this.)

  • David
    2019-04-14 13:12

    This book does wonders explaining certain mathematical related market topics into simply easy to understand examples. The book begins off really well discussing the belief and fallacies between different winning strategies. However, don't be reading this book if you're expecting an answer to: what is the best strategy; as this book only goes as far as explaining them and their implications with each other.This is still a great read if you prefer a more holistic view of the market as traditional studies can be biased in comparison.

  • JDK1962
    2019-04-12 17:59

    Nice overview of the market from a mathematical perspective. Perhaps it could be improved by some information on what you should do, rather than deconstructing pretty much every strategy/theory out there. Summary seemed to be that technical analysis is worthless, efficient market hypothesis is partially true and partially false, value analysis is probably the most reality based, but given the role of people in the system, none of it is worth much.My advice? Diversify and use ETFs that track major, broad-based indices. And that advice is worth what you paid for it.

  • Juan Hidalgo
    2019-03-26 09:51

    Tienen que gustarte mucho los números para no abandonar esta lectura. El autor aplica las matemáticas y la estadística a los vaivenes de la bolsa... sin demasiado éxito, ya que cuenta cómo él mismo acabó económicamente arruinado.

  • Christian
    2019-04-10 17:53

    This was a fun and entertaining read. The author really liked giving anecdotes about his investing experience, and some unrelated math ones, too.I wouldn't rely on it too much for practical advice, or as an introduction to investing, but it is an entertaining read.

  • Jay
    2019-03-26 17:58

    Amusing anecdotes kept me reading, and some math elements are introduced, but it's not very deep. The main insight I got from this book was that even a trained mathematician can lose his shirt in the stock market due to wishful thinking.

    2019-03-31 18:08

    Ottimo per chi crede nell'assoluta verita' dell'analisi tecnica applicata allo studio dei grafici delle quotazioniGreat for those who believe in absolute truth 'of technical analysis applied to the study of quotes graphs

  • Valerie
    2019-03-31 12:17


  • Chang
    2019-04-05 10:21

    A mathematician's take on the market efficiency theory.

  • Gnanvikas
    2019-04-04 18:00

    A nice read for people interested in statistics,probability and the stock market. The game theory examples quoted were very apt and reasoning is also good.

  • David Robins
    2019-04-16 10:19

    Rather whimsical look at the market, replete with mathematical models and anecdotes, especially about his losses on WCOM. Almost not at all technical, but an interesting read.

  • Dave
    2019-04-06 13:10

    I'm a finance geek, but this book was too technical for me. . . I suppose I'm not geeky enough.

  • Frank
    2019-04-17 12:57

    An entertaining introduction to the mathematics of the stock market. Could have used more mathematics and fewer autobiographical anecdotes in my opinion.

  • Jose Gaona
    2019-04-13 17:21


  • Mills College Library
    2019-04-11 11:14

    332.63204 P331 2003

  • Anil
    2019-04-04 12:05

    I loved it. An entertaining tale of hubris emotionally and intellectually riveting, and extremely useful. I read it twice.

  • Joe
    2019-03-28 11:07

    Well-crafted look into the mathematics and metrics that underly the stock market. I thought it was pretty well understandable, and would be for just about anybody.

  • Augusto
    2019-04-04 10:18

    começa bem, se embaralha na metade pois o autor mistura livro paradidático com ensaio, livro de piadas e conto, mas termina muito bem.