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Black Swans Now a Regular Part of Market Landscape
CNBC.com | March 16, 2011 | 12:58 PM EDT

For global financial markets, once-in-a-lifetime events are happening with such regularity that black swans may as well be white swans.

Such supposedly rare occurrences, brought into the national consciousness largely through Nassim Taleb’s 2007 book, “The Black Swan,” have dominated the markets for more than a decade.

They include the Internet explosion in the late 1990s, the ensuing dotcom bubble burst and stock market selloff a few years later, the 2001 terrorist attacks, the collapse of the real estate market that began five years ago, and now, the events in the Middle East and Japan.

The “highly improbable consequential” event is how Taleb frames the Black Swan phenomenon, and each time they arise, the markets react violently.

In his widely acclaimed book, he says traditional models and probability scales, in particular the bell curve, fail investors miserably, causing them to get on the wrong side of the trade primarily from taking on too much risk in their portfolios.

Indeed, the normal course of events—those happening within the belly of the bell curve—have little impact on stocks and other investments. It is only in times of great enthusiasm or great distress that truly impactful moves occur.

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