Jan

2

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"What do dancing honeybees and stock markets have in common? At first glance, not much. But both are complicated dynamic systems that are extremely difficult to model — until now. An MIT graduate student [Emily Fox] has developed a methodology for automatically constructing computer models that can accurately describe the behavior of such complex systems with very little background information.

"The methodology, which aims to come up with the simplest model that explains the data, accurately concluded that the honeybees have three dances. Biologists have long known that honeybees use the dances to communicate distance and direction of potential food sources or nest sites." Fox also tested the model on data from the Brazilian stock market, using the same algorithm she used for the dancing bees. Given information on the Brazilian market's daily returns over a four-year period, the model inferred the number of modes of market volatility and the probability that the market would shift to a different state of volatility."


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