Legos and the Stock Market.
Is there a Simple Correlation ?
The stock markets are said to be nonlinear, dynamic systems. Chaos theory is the mathematics of studying such nonlinear, dynamic system. Does this mean that chaoticians can predict when stocks will rise and fall?
Not quite; however, chaoticians have determined that the market prices are highly random, but with a trend.
The stock market is accepted as a self-similar system in the sense that the individual parts are related to the whole. Another self-similar system in the area of mathematics are fractals.
Could the stock market be associated with a fractal? Why not? In the market price action, if one looks at the market monthly, weekly, daily, and intra day bar charts, the structure has a similar appearance.
However, just like a fractal, the stock market has
sensitive dependence on initial conditions. This factor is
what makes dynamic market systems so difficult to predict.
Because we cannot accurately describe the current situation
with the detail necessary, we cannot accurately predict the
state of the system at a future time."