Fractal Market Hypothesis

Fractal Market Hypothesis

The fractal market hypothesis states that (1) a market consists of many investors with different investment horizons, and (2) the information set that is important to each investment horizon is different. As long as the market maintains this fractal structure, with no characteristic time scale, the market remains stable. When the market's investment horizon becomes uniform, the market becomes unstable because everyone is trading based upon the same information set. Theory due to Ed Peters.
References in periodicals archive ?
Since the 1980s, econometrists have introduced the long-term memory model in the financial field and considered that the cornerstones of the long-term memory of the finance market include the theories of noise trading [1], behavioral financial theory [2], and the fractal market hypothesis [3].
[5] Anderson, N and J Noss, 'The Fractal Market Hypothesis and its implications for the stability of financial markets', Bank of England Financial Stability Paper No.
Peters [1] put forward the fractal market hypothesis and employed R/S analysis method to prove the existence of fractal structure in financial market.