What is Black Swan Theory?
Black Swans are unpredicted, random events of huge impact. These events deviate from the normal expected course. They are thus, also called outliers as there is no reference data in the past which gives any clue to their occurrence in the future. No scientific model can predict them. Black Swan events can take place in business, politics, stock markets etc. These events are unforeseen and thus cannot be predicted.
Such events can be either positive or negative. E.g. the advent of the internet was such a positive watershed event which changed the way people look and live. Nobody had thought about the extent of its benefits.
Topics: Stock Market