A black swan event is an external event that shocks markets as it deviates beyond what market participants normally would expect. Black swan events are extremely difficult to predict. The term was popularized by Nassim Nicholas Taleb’s book “The Black Swan: The Impact of the Highly Improbable.”
Examples of Past Black Swan Events
– World markets tumble after the surprise that the United Kingdom voted to leave the European Union on June 24, 2016. Most traders thought the UK would vote to stay in the European Union.
– August 2011 crash where stock markets around the world plummet during late July and early August.
– The Flash Crash of 2010 where the Dow Jones fell 1,000 points as automated trading systems failed after Navinder Sarao manipulated the Chicago Mercantile Exchange’s E-mini futures contract by using spoofing tactics to place and cancel hundreds of thousands of orders with no intention of executing them.
– The Financial crisis of 2007 – 2008 where, on September 16, 2008, failures of large financial institutions in the United States occurred because of exposure of securities of packaged subprime loans and credit default swaps issued to insure these loans.
– March 10, 2000, the collapse of the technology bubble called the dot-com bubble.
– The terrorist attacks in New York on September 11, 2001, which caused global stock markets to drop sharply.
– The Panic of 1901 where markets were spooked by the assassination of President McKinley.
– Friday the 13th mini-crash where a failed leveraged buyout of United Airlines caused a crash.
The black swan (Cygnus atratus) is a large waterbird, a species of swan, which breeds mainly in the southeast and southwest regions of Australia. The species was hunted to extinction in New Zealand,but later reintroduced. Some academics cite lack of records during a period of time as evidence that the black swan was hunted to extinction in New Zealand. Within Australia they are nomadic, with erratic migration patterns dependent upon climatic conditions. Black swans are large birds with mostly black plumage and red bills. They are monogamous breeders that share incubation duties and cygnet rearing between the sexes.
Black swans have been introduced to various countries as an ornamental bird in the 1800s, but have escaped and formed stable populations. A small population of Black swans exists on the River Thames at Marlow, and near the River Itchen, Hampshire.
Described scientifically by English naturalist John Latham in 1790, the black swan was formerly placed into a monotypic genus, Chenopis. Black swans can be found singly, or in loose companies numbering into the hundreds or even thousands. Black swans are popular birds in zoological gardens and bird collections, and escapees are sometimes seen outside their natural range.