The term Joseph effect was coined by mathematician Benoît Mandelbrot to denote tendency towards cycles in time series. Mandelbrot named the Joseph effect in reference to the biblical story in which the Hebrew Joseph predicts 7 bountiful years of harvest followed by 7 lean years of harvest for ancient Egypt. The idea behind the Joseph effect is that future developments are strongly influenced by past developments, allowing for a degree of continuity and predictability.
The Noah effect – another term coined by Mandelbrot – denotes the occurrence of major events with a high degree of randomness across a time series. According to Mandelbrot’s theories, both effects are at play in economic developments. Randomness can be measured using the Hurst exponent, with measurements between 0 and 0.5 indicating a high level of randomness, and measurements between 0.5 and 1 indicating lower levels of randomness.
Using fractals in investment