The Web of Causation
...complex systems, such as financial markets or the Earth’s biosphere, do not seem to obey causality. For every event that occurs, there are a multitude of possible causes, and the extent to which each contributes to the event is not clear, not even after the fact! One might say that there is a web of causation. For example, on a typical day, the stock market might go up or down by some fraction of a percentage point. The Wall Street Journal might blithely report that the stock market move was due to “traders taking profits” or perhaps “bargain hunting by investors.” The following day, the move might be in the opposite direction, and a different, perhaps contradictory, cause will be invoked. However, for each transaction there is both a buyer and a seller, and their worldviews must be opposite for the transaction to occur. Markets work only because there is a plurality of views. To assign a single or dominant cause to most market moves is to ignore the multitude of market outlooks and fail to recognize the nature and dynamics of the temporary imbalances between the numbers of traders who hold these differing views.
Notes:
Nigel Goldenfeld explains why the simplistic explanations for market movements so popular in the news media are also so ridiculous.
Folksonomies: predictability causation modeling
Taxonomies:
/health and fitness/disease/autism and pdd (0.590223)
/law, govt and politics/politics/elections (0.577325)
/news (0.338775)
Keywords:
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Entities:
stock market:FieldTerminology (0.851515 (negative:-0.483449)), financial markets:FieldTerminology (0.706411 (negative:-0.483318)), Nigel Goldenfeld:Person (0.515153 (negative:-0.716477)), news media:FieldTerminology (0.388764 (negative:-0.716477)), The Wall Street Journal:PrintMedia (0.376592 (neutral:0.000000))
Concepts:
Causality (0.975981): dbpedia | freebase
Stock market (0.921729): dbpedia | freebase | opencyc
World view (0.622564): dbpedia | freebase
Economics (0.574661): dbpedia | freebase | opencyc
Metaphysics (0.546443): dbpedia | freebase | opencyc
Earth (0.546187): dbpedia | freebase
Stock exchange (0.543322): dbpedia | freebase | opencyc
Finance (0.529655): dbpedia | freebase
This Will Make You Smarter
