Is It So Bad that We Cannot Recognize Black Swans?

40 Pages Posted: 21 Sep 2010

See all articles by Fuad T. Aleskerov

Fuad T. Aleskerov

National Research University Higher School of Economics

Lyudmila Egorova

National Research University Higher School of Economics

Date Written: September 21, 2010

Abstract

Analyzing the reasons of financial crises in "The Black Swans," N.N. Taleb concludes that modern economic models badly describe reality for they are not able to forecast such crises in advance.

We tried to present processes on stock exchange as two random processes one of which happens rather often (regular regime) and the other one - rather rare. Our answer is that if regular processes are correctly recognized with the probability a bit higher than 1/2, this allows to get positive average gain. We believe that this very phenomenon lies in the basis of unwillingness of people to expect crises permanently and to try recognizing them.

Suggested Citation

Aleskerov, Fuad T. and Egorova, Lyudmila, Is It So Bad that We Cannot Recognize Black Swans? (September 21, 2010). Available at SSRN: https://ssrn.com/abstract=1680154 or http://dx.doi.org/10.2139/ssrn.1680154

Fuad T. Aleskerov (Contact Author)

National Research University Higher School of Economics ( email )

20 Myasnitskaya Ulitsa
Moscow, 101000
Russia

Lyudmila Egorova

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 101000
Russia

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