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Taking stock

The workings of currency markets has perplexed economists for a long time. The dynamics of speculative markets has been studied and modeled extensively with the hope of trying to beat the market. Now surprisingly, S Ghashghaie and his team has shown that the information cascade in markets follows the same dynamics as energy cascade in a turbulent fluid. The behaviour of long-and short-term investors and their interplay, plays a crucial role in the market, much like the energy flow from longer to shorter scales in a turbulent fluid. The field of turbulence may just hold the key to understand the apparently random behaviour of the market ( Nature , Vol 381, 1996).

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