AI and Geoeconomics

Similarly to the wave-particle duality, two families of forces are driving markets prices dynamics and oscillations : economical information on one side and emotional signals on the other side. To quote Robert Shiller [1]: "The failure to recognize the housing bubble is the core reason for the collapsing house of cards we are seeing in financial markets in the United States and around the world. If people do not see any risk, and see only the prospect of outsized investment returns, they will pursue those returns with disregard for the risks.Were all these people stupid? It can’t be. We have to consider the possibility that perfectly rational people can get caught up in a bubble." This is for Shiller and the behavioral finance analysts a consequence of an "informational cascade": a situation where people observe the actions of others and then make the same choice that the others have made, independently of their own private information signals. Investors feel reassu...

Professional investment may be liked to those newspaper competitions in which competitors have to pick out the six prettiest faces from a hundred photographs, the prize being awarded to the competitor whose choice most nearly corresponds to the average preferences of the competitors as whole; so that each competitor has to pick, not those faces he himself finds prettiest, but those which he thinks likeliest to catch the fancy of the other competitors, all of whom are looking at the problem from the same point of view. It is not a case of choosing those which, to the best of one's judgment, are really the prettiest, nor even those which average opinion genuinely thinks the prettiest. We have reached the third degree where we devote our intelligences to anticipating what average opinion expects the average opinion to be. And there are some, I believe, who practise the fourth, fifth and higher degrees. If the reader interjects that there must be surely large profits to be gained f...