On Judy Curry’s Climate Etc. blog, a commenter on one thread said the following and I had a reply all typed up, but decided to post it her, instead.
[WebHubTelescope] Here is a simple financial market model, which essentially demonstrates the effects of implied correlation. When stock’s move in unison, then market swings become larger. When stocks differentiate themselves, some up some down, then the swings are smaller because the individual movements can cancel. We are entering a phase where the implied correlation is high and the stock market no longer shows useful differentiation. 400 to 600 point swings will become the norm.
How would you test this hypothesis?
Yes, exactly! ( A light goes on in my head…)
When they “move in unison”… Yes, that happens. It is about cyclical organization, perhaps in an unrecognized cycle that hides within what seems random but isn’t. Stocks or heat packets are normally randomized to some “normal” level. But in that randomness is also a propensity from time to time for things to align – to push in parallel. Just like rolling a die that comes up three sixes rolled consecutively.
This kind of thing could and would happen on several different scales over time. Sometimes the organization entrains a LOT of heat packets or stocks.
Look at clouds. Normally random and mostly vertical plumes, though their size and morphology fall into classes, but mostly some variation on “mandlebrotian” mushroom shapes. Yet we’ve all seen cloud patterns where there are very long rows in the sky. The wind action or something for a while is no longer acting random, though even the organization itself is a randomness. But maybe not. Look up also “Undulatus asperatus” clouds. What I saw was WAY better than that shown on Wikipedia. I have photos myself of this newly delineated cloud type, where they look like the underside of a vaulted ceiling, each vault 1/4 to 1/3 of a mile wide, and consistent in their widths, row after row and miles and scores of miles long. And it stayed that way long after I drove 30 miles. I did see the end of the pattern, and the wind flow still existed, even when the visible clouds had gradually faded to blue sky. Thus, it was not the clouds as the cause, but as the effect. They also extended far in the other direction, as far as I could see in that direction.
Here is perhaps the best image:
- Undulatus asperatus clouds, Hoffman Estates IL, along I-90, May 26, 2009