A Black Swan event in its easiest form is an event that comes as a shock and makes a tremendous difference.
The history of the Black Swan Theory - or the Theory of Black Swan Events - traces all the way back to a Latin articulation of the second hundred years by Roman poet Juvenal, when he would describe something as:
"rara avis in terris nigroque simillima cygno"
This Latin articulation means "a rare bird in the grounds and particularly like a black swan". Initially when this phrase was first utilized, it was believed that black swans didn't exist.
The Black Swan theory was additionally developed by analyst and trader Nassim Nicholas Taleb. In 2007, he distributed a book entitled The Black Swan: The Impact of Highly Improbable, which made sense of and formalized the Black Swan theory.
As per Taleb, Black Swan events generally follow three credits:
- A Black Swan is an exception. It is past that of normal expectations and thus, nothing in the past might have anticipated it.
- It generally conveys an extreme or huge impact.
- A Black Swan event, in spite of being an exception and eccentric, will positively have a rational clarification prepared after its most memorable occurrence, making that type of event reasonable and unsurprising.
Instances of previous Black Swan events as portrayed by Taleb, are the rise of the internet, the personal computer, the disintegration of the Soviet Union, and the September 11, 2001 assaults.
- The term was promoted by the book, The Black Swan, by Nassim Nicholas Taleb.
- A black swan is an extremely rare event with serious results.
- Black swan events can make catastrophic damage an economy by negatively impacting markets and investments, yet even the utilization of robust modeling can't prevent a black swan event.
- Dependence on standard forecasting devices can both fail to foresee and possibly increase weakness to black swans by spreading risk and offering false security.
- It can't be anticipated ahead of time, however sometime later, many falsely claim it ought to have been unsurprising.
What Is a Gray Swan Event?
A [grey swan](/dark swan) event is an exception, yet which is more presumably than a black swan. Thus, individuals can better prepare for and hedge against a dark swan than for a black swan.
For what reason Do They Call It a Black Swan Event?
A black swan is viewed as rare, since most swans are white. As a matter of fact, the story goes that black swans were thought once to not the least bit exist, until at last one was found. The example is that our thought process are exceptionally rare events might be surprisingly common.
What Is a Black Swan Event in the Stock Market?
A black swan event in the stock market is much of the time a market crash that surpasses six standard deviations, making it extremely rare from a probabilistic point of view. Some have contended that stock prices are "fat-followed" and that such events are, in reality, more regular than the statistics would let on.