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My guest today is Didier Sornette, the Professor on the Chair of Entrepreneurial Risks at Swiss Federal Institute of Technology Zurich. He is also a professor of the Swiss Finance Institute, associated with both the department of Physics and the department of Earth Sciences at ETH Zurich. He has worked on the King effect, a theory used to predict economic bubbles. Didier also set up the Financial Crisis Observatory in October of 2008. He brings an interesting perspective to financial crisis’s, and bubbles.
The topic is market bubbles.
In this episode of Trend Following Radio we discuss:
- The adaptive market hypothesis
- Dragon Kings vs. Black Swans
- New economy syndrome
- Predictive markets
- Finite singularity
- Equilibrium of the world
“When herding behaviour among investors ramps up, a stock’s or index’s growth rate can increase faster than exponentially, leading to more herding. This positive feedback brings the system to a tipping point. About two-thirds of the time, a crash results.” – Didier Sornette
Mentions & Resources:
- Didier Sornette
- ETH Zurich
- The adaptive market hypothesis
- The Financial Crisis Observatory
- Social Bubble Hypothesis
- Human Genome Project
- Andrew Lo
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