Morningstar - Q2 2020 - 37
Spotlight
Market Crashes
Fat Tails and a Gaggle of Economists
42
Black Turkeys Everywhere
Crashes aren't anomalies like
black swans. They regularly
occur, as do recoveries.
B L AC K T U R K E Y S
Paul D. Kaplan
While the circumstances of the current crash
in market value might be unique to the coronavirus
pandemic, the more important question is:
Are such drops normal for equity markets, or is
this market crash different?
During the global financial crisis of 2007-09,
some observers described the events that were
unfolding as a black swan, a unique negative
event that could not be foreseen because no
similar events had occurred in the past (see Taleb
2007).1 This was a very odd notion to me at the
time because I studied long-term capital market
data, having worked at Ibbotson Associates, a
firm that specialized in collecting historical market
1 The black swan is a metaphor for how a single observation can overthrow a long, widely held belief. In Europe, all swans are
white, so Europeans believed that all swans everywhere are white. The first sighting by Europeans of a black swan in
Australia in 1697 overthrew that belief.
morningstar.com/lp/magazine
37
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Morningstar - Q2 2020
Table of Contents for the Digital Edition of Morningstar - Q2 2020
Contents
Morningstar - Q2 2020 - CT1
Morningstar - Q2 2020 - CT2
Morningstar - Q2 2020 - Cover1
Morningstar - Q2 2020 - Cover2
Morningstar - Q2 2020 - 1
Morningstar - Q2 2020 - 2
Morningstar - Q2 2020 - Contents
Morningstar - Q2 2020 - 4
Morningstar - Q2 2020 - 5
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Morningstar - Q2 2020 - Cover3
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