The Black Swan: The Impact of the Highly Improbable

Musgrave, Gerald L.

doi:10.1057/be.2009.6

Cited by 3 publications

(4 citation statements)

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“…The stock market's reaction to the coronavirus's potential economic consequences is nothing new; in the previous three decades, four other big 'Black Swan' occurrences have caused Sensex drops of up to 58%. (Musgrave, G. 2009).…”

Section: Earlier Black Swan Events That Sunk Sensexmentioning

confidence: 99%

Repercussions of Black Swan Event on The Indian Stock Market-A Case Study of Domestic Investors

Indoria

2024

jier

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As the stock market is constantly changing and is dependent on a wide range of unpredictable variables, predicting its behaviour is one of the most difficult tasks in the time-series prediction domain. Black Swan occurrences, which are very rare but sometimes deadly, can have a significant impact on the market. The stock market, like other financial markets, is vulnerable to what are known as ‘Black Swan’ occurrences, which are sudden and unexpected yet have a profoundly detrimental effect. If the successful stock trend can be forecast, regulators and investors may improve their trading tactics, lowering investment risk while increasing profits. First, this study examines the effect of the black swan event on the stock of the listed firms in which our sample of respondents invests, and then it compares the effectof the varied risk handling of many prominent enterprises on the stock price recovery. A more rapid reaction to risk occurrences means early processing time and less vulnerability to black swans.

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Section: Earlier Black Swan Events That Sunk Sensexmentioning

confidence: 99%

Repercussions of Black Swan Event on The Indian Stock Market-A Case Study of Domestic Investors

Indoria

2024

jier

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“…As such, uncertainty characterization using ranges of values can represent a wide range of scenarios. Situations where complete losses occur generally result from highimpact low-probability events and are often inappropriately overlooked in planning and rationalized with the benefit of hindsight (see the black swan theory Musgrave and Taleb (2009)). In this paper, irrespective of the probability of occurrence of such events, the model seeks to immunize the grid against them.…”

Section: Robust Counterpartmentioning

confidence: 99%

Towards more resilient integrated power grid capacity expansion: A robust optimization approach with operational flexibility

Caunhye

Cardin

2018

Energy Economics

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This paper proposes a multi-period two-stage adaptive robust optimization model for long term power grid capacity expansion in an environmentally conscious way under generator output uncertainties due to natural variations and generator disruptions. In the first stage, the model plans generator addition and transmission line setup prior to, and robust to, uncertainty realization. In the second stage, it plans power generation and dispatch after, and flexible to, uncertainty realization. The model exploits the idea of strategic robustness and operational flexibility as a way to improve performance in the face of uncertainty. The robust optimization framework uses deterministic uncertainty sets, with parameters that permit control over the level of conservatism of the solution. Because the resulting two-stage model is semi-infinite and, therefore, intractable, it is reformulated as an affinely adjustable counterpart. The reformulation uses affine decision rules on second-stage variables and converts, after constraint processing, the semi-infinite model into a finite single-stage mixed integer programming model. The resulting model is tested on the IEEE 30-bus system and value gains are shown by comparing the performance of the model with a deterministic model and a stochastic programming model with varying risk aversions.

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“…Further, they advised their investors to prepare for the worst. We have come to know black swan events as incidents that occur outside of what normal predictions would suggest (Taleb, 2010). The cornerstone of the black swan is that it is an event that is unanticipated and typically has negative consequences.…”

Section: Introductionmentioning

confidence: 99%

“…Preparing for black swan events is difficult because the expected monetary value of the investment to protect oneself under the black swan state is so low that it does not make sense because of the probability of the event. However, the novel coronavirus, COVID‐19, should not be considered a black swan as articulated by Taleb (2010). In fact, in a recent interview, Taleb expressed his frustration about COVID‐19 being referred to as a black swan since they are characterized as something unpredictable and the coronavirus is completely predictable (Avishai, 2020).…”

Section: Introductionmentioning

confidence: 99%

How the effective reproductive number impacts global stock markets

2023

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The pandemic caused by the novel coronavirus COVID‐19 has impact the economies of countries across the world. In a short period of time, researchers have begun to analyse the effect of the pandemic on global stock markets. Although the most known measurements of COVID‐19 are the number of new cases and deaths, there are more robust indicators. In particular, the effective reproductive number is one of the most important indicators to analyse the pandemic which indicates the degree to which the spread is under control. In this paper, we assess the impact that the Effective Reproductive Number (Rt) has on 26 countries around the world (32 stock market indexes) comparing the performance of various forms of Generalized AutoRegressive Conditional Heteroskedasticity models. The results demonstrate that of the 32 stock markets analysed, 37.5% had a negative effect with respect to Rt and only in 12.5% of the cases was the effect of the variation of Rt positive. This implies that in more than a third of the stock markets analysed as the pandemic progressed uncontrolled the result was a decrease in the value of the market index. The 11 of the 26 countries analysed had a negative and significant effect (Brazil, Germany, Indonesia, Israel, Italy, Japan, Russia, South Korea, Sweden, Taiwan, and United States). Findings suggest that the Effective Reproductive Number volatility had a significant impact on 10 of the 26 countries analysed (38.5%) (Australia, Brazil, Canada, China, India, Italy, Mexico, Russia, Singapore and United Kingdom).

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The Black Swan: The Impact of the Highly Improbable

Cited by 3 publications

References 0 publications

Repercussions of Black Swan Event on The Indian Stock Market-A Case Study of Domestic Investors

Repercussions of Black Swan Event on The Indian Stock Market-A Case Study of Domestic Investors

Towards more resilient integrated power grid capacity expansion: A robust optimization approach with operational flexibility

How the effective reproductive number impacts global stock markets

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