Gershom Zajicek M.D.
Hebrew University of Jerusalem
Registered: Feb 2004
Stock market Intelligence
The stock market is regarded here as a living system, and since life is endowed with intelligence, what might be a stock market intelligence? But first, what do we mean by intelligence?
An amoeba swims in a pond and interacts with it. It samples mass and energy and responds with action. During this interaction amoeba distinguished between pleasant and unpleasant input, which will trigger its immediate action response, or reaction. It is attracted to pleasant experience, and escapes the unpleasant. Its decision about its immediate reaction is influence by its past experience (knowledge) which is stored in its structure. Amoeba's memory is embodied.
Amoeba interaction may be represented as a repeating cycle. Input → judgment → action → input. . . Which is regarded here as amoeba intelligence.
As life on earth evolved single cells aggregated into complex organisms and operate in ascending hierarchies of complexity. Our body is made of cells which aggregate into tissues, which form organs and so on. Each hierarchy is endowed with its own intelligence operating like in the amoeba. Entities like red blood cell, neuron, liver or brain have their own intelligences.
The stock market differs from the human organism. It has only two hierarchies, the trader, or stock market unit, and the stock market it self. Each with its own intelligence. We hope to understand the trader, however, what is the intelligence of the system? The answer may be found in a living entity called the swarm.
Swarm describes a behavior of an aggregate of animals of similar size and body orientation, generally moving en mass in the same direction. The term can be applied to fish, insects, birds, various microorganisms such as bacteria, and people. http://en.wikipedia.org/wiki/Swarm
Watch the amazing behavior the swarm of European starlings http://www.fazed.org/video/view/?id=336 The swarm flies as a unit. Despite its rapid turns birds always remain together. You wonder who controls its decision where and when to turn? Its behavior is a manifestation of a swarm intelligence which obeys the same rules of the amoeba. Its unraveling requires the understanding of its input, knowledge and judgment. Swarm knowledge (memory) is embodied in its structure. Its judgment is based on the same pleasure principle of the amoeba. Yet what is its input? Without its specification we cannot define swarm intelligence.
The stock market is also a swarm. Its input are economical impulses, traders, etc. Its reaction (behavior) is manifested by indexes, like Dow-Jones industrial average, S&P 500, or NASDAQ. Their change (movement) is analogous to the flock behavior which seems to turn erratically up and down. Its recent crash indicates that unlike the bird swarm, stock market knowledge is still imperfect. Yet being a living system, the stock market will gradually evolve to stable strange attractor.
Report this post to a moderator | IP: Logged