{"id":11904,"date":"2022-11-09T17:57:50","date_gmt":"2022-11-09T14:57:50","guid":{"rendered":"https:\/\/www.robomarkets.com\/blog\/?p=11904"},"modified":"2023-08-29T17:52:00","modified_gmt":"2023-08-29T14:52:00","slug":"what-is-black-swan-event-and-how-it-impacts-markets","status":"publish","type":"post","link":"https:\/\/www.robomarkets.com.cy\/blog\/education\/what-is-black-swan-event-and-how-it-impacts-markets\/","title":{"rendered":"What is a Black Swan Event and How Does It Impact Stock Markets?"},"content":{"rendered":"\n

This article is dedicated to \"black swan events\" – rare and complicated global events that were difficult to predict and perceive, with a major effect, but are rationalised with the benefit of hindsight.<\/p>\n\n\n\n

<\/span>The black swan theory<\/span><\/h2>\n\n\n\n

The \"black swan event\" metaphor describes an improbable event with a major impact that is difficult to predict – both the event itself and its consequences. Examples of such events in the US are the Great Depression of 1929, the financial crises of 2008 and 2014, and the terrorist attacks of 11 September 2001 commonly known as 9\/11.<\/p>\n\n\n\n

The tradition of calling such global events \"black swans\" was introduced by American economist and mathematician, and former trader, Nassim Taleb, in his book \"The Black Swan: The Impact of the Highly Improbable\", published in 2007.<\/p>\n\n\n\n

It should be noted that the theory of uncertainty in life and the economy was formulated by Taleb already in 2004 in his book \"Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets\".<\/p>\n\n\n\n

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<\/span>What are the main signs of a black swan event?<\/span><\/h2>\n\n\n\n

For an event to be called a black swan, it must have the following three main characteristics:<\/p>\n\n\n\n

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  1. The event is fully unpredictable.<\/li>\n\n\n\n
  2. Its consequences are tremendous, and the global impact is immense.<\/li>\n\n\n\n
  3. Rational explanations appear post-factum only.<\/li>\n<\/ol>\n\n\n\n

    <\/span>What leads to a black swan event?<\/span><\/h2>\n\n\n\n

    To understand the theory better, Nassim Taleb suggests determining the factors that influence our readiness to face complicated global issues:<\/p>\n\n\n\n