I think it's a pretty good model most of the time, but there are three major flaws:
1) "Noise" traders do not necessarily cancel each other out
2) Markets are not continuous. Any continuous model is necessarily an approximation
3) Use of the bell curve to model price movement is a misunderstanding of the central limit theorem
I could list others but these are the most important imo
Recommended, related book: Misbehaviour of Markets by Mandelbrot.
Last edited by arabianights; Feb 6, 2008 at 9:09am.
Reason: hungover, making words make sense
