Good stuff here from Didier Sornette. Sornette has done some superb risk on behavioral finance and risk management. This recent Ted Talk is a must watch:
“While financial crashes, recessions, earthquakes and other extreme events appear chaotic, Didier Sornette’s research is focused on finding out whether they are, in fact, predictable. They may happen often as a surprise, he suggests, but they don’t come out of the blue: the most extreme risks (and gains) are what he calls “dragon kings” that almost always result from a visible drift toward a critical instability. In his hypothesis, this instability has measurable technical and/or socio-economical precursors. As he says: “Crises are not external shocks.”
An expert on complex systems, Sornette is the chair of entrepreneurial risk at the Swiss Federal Institute of Technology, and director of the Financial Crisis Observatory, a project to test the hypothesis that markets can be predictable, especially during bubbles. He’s the author of Why Stock Markets Crash: Critical Events in Complex Financial Systems.“
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.