PFP2506. Demystifying Black Swans

Since the release of the book The Black Swan by Nassim Nicholas Taleb in 2001, the investing community and financial press have made abundant use of the term “black swan” to refer to large, abnormal negative returns on investments. The goal of the session is, through the use of historical case studies, to help advisers understand and communicate to their clients the range of possible outcomes in financial markets. We also explore how portfolio composition and time horizon heavily influence which events are “black swans” or not, and highlight implications for asset allocation.

Learning Objectives:

• Analyze information about the distribution of returns during historical episodes of market volatility.
• Identify potential mechanisms to help reduce the range of outcomes in a portfolio.
• Determine how to better communicate about the randomness of financial markets with end clients.