A Fingerprint of Instability in Biology and Finance

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ashvinp's picture
Status: Gold Member (Offline)
Joined: Jan 20 2010
Posts: 412
A Fingerprint of Instability in Biology and Finance

The following is a relatively short piece discussing the similar complex dynamics of both biological and financial systems. It focuses on chaotic variability as an indicator of health (or lack of it) in both the human heart and the stock market. Here is the first section:


     Recently, there has been much research into the chaotic dynamics of complex systems in many different fields. Complexity theory provides great analytical insights into the structures of "hard" sciences such as biology and also social sciences such as economics. It can even reveal dyamic properties that will serve as predictive indicators across both of the two fields (and perhaps many others). It should be noted that "predictive" doesn't necessarily mean a specific result will always follow, but that it becomes significantly more likely to occur. The following article will explore a relatively simple indicator which identifies high probabilities of instability in both the human circulatory system (specifically cardiac) and financial markets. Let's start this discussion with a short quiz. Take a look at the following four graphs of heartbeats per minute over a 30-minute interval, and see if you can guess which one(s) belongs to a healthy patient and which one belongs to a patient facing sudden cardiac death:

Full piece - http://peakcomplexity.blogspot.com/2010/10/fingerprint-of-instability-in-biology.html

goes211's picture
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Joined: Aug 18 2008
Posts: 1114
Re: A Fingerprint of Instability in Biology and Finance

That was quite good.  I especially liked the final paragraph.

The politicians and central bankers would like to think of themselves as the defibrilator that has sparked the financial "heart" back into a healthy rhythm. However, that analogy is simply not accurate, as evidenced by the current equity market's painfully boring microstructure. They are more like the artificial respirator that is keeping the brain-dead markets "technically" alive. Their tireless efforts are simply masking the terminal reality that lies underneath, and now we're all just waiting for someone or something to finally pull the plug.

land2341's picture
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Joined: Aug 20 2009
Posts: 402
Re: A Fingerprint of Instability in Biology and Finance

Loved that last paragraph!!  I too have felt the strong desire that we just crash the whole thing so we can start over.  It'll hurt but just get it done!

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