Seren Getty discussed on FT Alphachat

FT Alphachat
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Automatic TRANSCRIPT

Voting behavior can actually affect markets in a very dramatic fashion i completely agree with you on that one i can remember people talking to me in a seven the head of the ahead of the crisis saying that what you've got to worry about is that this is like the seren getty and everybody knows that if you if you won't be the wildebeest doesn't get chomped by the federal the lion you need to be in the middle of the hood and that's actually what's most dangerous you also look very intriguingly at network feary it's connectedness which is another a another idea that a lot of only discovered for the first time once we discovered it mattered in a seven and eight could you explain how connectedness matters and how that's affected the adaptive markets by puff assess that's a very important concept and the concept really emerges as a contrast to what is currently being done now in areas like risk management for financial investments okay so typically when we think about risk management and investor behavior we use a very statistical approach that that returns of a particular investment aren't going to be dictated by the statistical distribution but in fact what happens in financial markets is that investors are going to be reacting to each other's behavior and so the more tightly connected a market is the more investors are tied to each other's fates the more likely it is that small perturbations in market values can spread like a cascades or a virus to the entire market so measuring connectedness measuring how one institution or individual is tied to the fate of another institution or individual can give us insights into how easily these kinds of shocks can propagate and how they can be easily magnified in very very quickly if we have the wrong event happening at the wrong time and ultimately the financial crisis is the perfect illustration.

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