Sunday, November 28, 2010

Is our world full of "black swan" events?

In his 2007 book “The Black Swan: The Impact of the Highly Improbable”, Nassim Taleb commented that the impact of hard-to-predict and rare events can shape society and that “Globalization creates interlocking fragility, while reducing volatility and giving the appearance of stability”. Since then, many events have reshaped the global economy into a less certain place.

MY TAKE: To the extent that uncertainty is now the norm, investors may begin to factor uncertainty into their processes. However, obtaining superior investment returns may require approaches that anticipate changes in asset price direction and are executed in a nimble and opportunistic fashion. If these strategies become more prevalent, market volatility will persist.

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