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3/5/05
Super-Complex Scientific Speak for Financial Market Operators,  by Laurel Kenner

We introduced a glossary of old-time stock market trading terms last year to enable readers to inject a flavor of timeless experience, wealth and knowledge to their discourse. Inspired by the success of that endeavor, we today begin a companion glossary of scientific-sounding language  that connotes a level of general and technical knowledge far superior to that of yours and mine.

Consider how market talk has evolved over the years:

19th century: "The market will fluctuate." (J.P. Morgan)

20th century: "The market will follow the path of least resistance." (Vic's Grandpa Martin)

21st century: "The market seems to be in a chaotic or nonlinear state."

If a sentence is peppered with words like  "criticality," "log periodic fluctuations," "mode dynamics," "incipient crisis," "scaling behavior" and "fractality (mono- or multi-)," and you find yourself thinking, "Gosh, this guy sounds like he's applying post-doctoral knowledge to our field...but what does it mean?" you can be sure it's Super-Complex Scientific Market Speak. Here, then, is our first official entry:

ANSATZ: framework.

"It has been found that a meaningful economic taxonomy may be obtained by starting from the information stored in the time series of stock price only. This has been achieved by assuming that a metric distance can be defined between the synchronous time evolution of a set of stocks traded in a financial market and under the essential Ansatz that the subdominant ultrametric associated with the selected metric distance is controlled by the most important economic information stored in the time evolution dynamics." (Rosario N. Mantegna and H. Eugene Stanley, "Investigations of Financial Markets Using Statistical Physics Methods," The Science of Disasters: Climate Disruptions, Heart Attacks and Market Crashes (Berlin: Springer-Verlag, 2002)

Philip J. McConnell volunteers:

My nominations would be from the French Geophysics Professor's book on stock market crashes:

"A central property of a complex system is the possible occurrence of coherent large-scale collective behaviors with a very rich structure, resulting from the repeated nonlinear interactions among its constituents."

"In all these cases, it has been found that, with very few exceptions, log-periodic power-laws adequately describe speculative bubbles ..."

"The limit of very long-wavelength capillary modes corresponds to arbitrary translations of the wall, an embodiment of the concept of Goldstone modes, which tend to restore translational symmetry broken by the presence of the 'Bloc' wall."

"Intuitive explanation of the creation of a finite-time singularity at t (critical). The faster than exponential growth of the return and of the crash hazard rate correspond to nonconstant growth rates, which increase with the return and with the hazard rate. The following reasoning allows us to understand intuitively the origin of the appearance of an infinite slope or infinite value in a finite time at t (critical) called a finite-time singularity."

"One can indeed observe a characteristic power law acceleration, which is decorated by log-periodic structures at many different scales as the critical time is approached. It turns out to be possible to explicitly solve this model and demonstrate rigorously the existence of these log-periodic structures decorating the average power law."

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My personal opinion: The rise of geek speak among market quants has exhibited exponential growth occasionally punctuated by sinusoidal oscillatory behavior as the influence of contagious behaviors has created fads in word choice in both the strictly periodic domain as well as time varying near periodic frames of reference.

Laurence Glazier adds:

What I always wonder about academics and quants like these, is how many of them actually trade on their own account (when they get home from the day job)?

My technospeak to describe the market: "fathomless." I have a Hokusai wave print by where I trade.

(Hiroshige Hokusai, "In the Hollow of a Wave off the Cast at Kanagawa")