Hello,
I haven't been posting for a while due to some events that I had to prioritize and unfortunately, but not least important, I had to step the blog aside for a bit. However, it was worth it. I'll start to work for a big brokerage firm here in Brazil in the beginning of April and I'm so happy and excited to start this new path in my career.
In the interval between the last post and this one, a lot of events happened in the world that affected the economics, politics and social fields.
One example of those events are the earthquake and tsunami in Japan a few days ago, an event very difficult to predict because deviates beyond what is normally expected of a situation. Another example is the unrest in the Middle East starting in Egypt spreading to Libya, Tunisia and so on that drove a climb in the oil price above $100 a barrel.
Those unpredictable events are called Black Swan events. This term was popularized by Nassim Nicholas Taleb, a finance professor and former Wall Street trader. According to the New York Times, black swan are events with the following attributes.
First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.
First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.
Here you can see a series of black swan events and the impacts on the stock market.
Unrest in Egypt
Since Feb. when the riot started to become significant the stock market plunged.
Nikkei 225
March 16 - Earthquake and tsunami.
VIX (Volatility S&P500 index)
