Day Two in Geneva: black swans, a new way to clone and new research on persistence

Sep 27th, 2007 | Filed under: Alternative Beta & Hedge Fund Replication

Taleb: Definitely not a normally-distributed kind of guy

Day two was kicked off by a thought-provoking presentation by Nassim Nicholas Taleb, author of several best-selling books about risk, including: Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets, and recently: The Black Swan: The Impact of the Highly Improbable.

Taleb’s basic premise is that the familiar bell-shaped “normal” distribution has little relevance to the financial world.  In fact, Taleb doesn’t even think it’s that useful for many non-financial applications.

He shows, for example, that approximately half of the cumulative return of the S&P 500 over the past 55 years was the result of only 10 trading days (of both up and down varieties). 

      

(Source: Fortune Magazine) 

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