The Global Financial Complexity Index™ (GFCI™) is a meta-index which measures the complexity of the global financial system. The GFCI™ is based on the closing values of the indices of the World’s main market indices and is computed on a daily basis. Essential to the global investor, the GFCI™ measures the ‘temperature’ of the…
The Principle of Ignorance is a ‘corollary’ of the Principle of Fragility, which states: Complexity X Uncertainty = Fragility This principle states that highly complex actions (or business models) lead to situations of fragility in uncertain environments (e.g. markets). For example, a highly articulated portfolio may result to be fragile in a…
In the current economic situation, of falling stock markets, plummeting oil prices and sustained turbulence, the global investor must know which regions/countries offer better long-term sustainable investment opportunities. In addition to having one of highest resilience ratings in the Euro Area (Italy – 73.1%, versus 70.5% of Germany for example), Italy is the 3rd…
Why do most theorems in maths start by saying “let f(x) be a continuous differentiable function…”? Why do so many theorems in statistics assume a normal distribution? Why is it that in mechanics we tend to speak of small-amplitude oscillations around a position of equilibrium? Why is it that we neglect anything that has “epsilon…
Why over 90% of projects finish late? There is plenty of literature on the subject. This is a good example. In multi-project environments, such as the one illustrated below things can get very complex as project share resources (financial, manpower, equipment, etc.). When it comes to project costs, similar statements can be made.…
Complexity and interdependency are the hallmarks of our time. The increase of complexity and turbulence in the markets and in the economy demands new approaches when it comes to making investments, running a business, strategy and governance. Excessive complexity is the source of fragility and exposure. In our view, it is the main threat…
You only appreciate the importance of systemic analysis once you see the kind of new knowledge it delivers. There is much talk of systemic analysis in finance but there is very little research on the subject, not to mention a regulatory vacuum. We analyze stock markets on a daily basis. In particular, we focus on…
The complexity of modern products, as well as the associated manufacturing processes, have been increasing over the past few decades and there is evidence the trend will continue. Complexity means functionality. Consider how many things can be done with smart-phones, in addition to making phone calls! Think of automobiles, which can maintain distance from…
“…correlation is charlatanism” Photo: AP photo/Richard Drew “Anything that relies on correlation is charlatanism” is a great article. But is correlation charlatanism? Yes it is. But it is not for the reasons explained in the article. Here is why. Correlations are present everywhere. The concept of correlation is one of the key constructs of statistics,…
Over the past twelve months we’ve had the Ruble crisis, the plummeting oil prices, the Ukraine crisis, the Greek referendum and elections, the Chinese markets plunge and, recently, the Volkswagen scandal. Which hit the hardest? How do you measure the intensity of a crisis? How do you measure the response of the economy in…
