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Stalking the Black Swan: Research and Decision Making in a World of Extreme Volatility (Columbia Business School Publishing) Hardcover – March 31, 2010
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As a respected equity analyst, Kenneth A. Posner has seen firsthand what it means to be blindsided by black swans. In this deeply thoughtful and heartfelt book, he traces out the sources of what we think of as 'surprise events' and offers a pragmatic approach for confronting and hopefully mitigating their adverse effects. Along the way, there are many beautifully elaborated stories depicting how swans often won the day, as well as descriptions of the all-too-rare positive outcomes. This is a valuable book for anyone who treads a path through an uncertain world (hint: that should be everyone!).(Martin Leibowitz, managing director, Morgan Stanley, and coauthor of The Endowment Model of Investing)
How do highly intelligent bankers and investors get surprised and brought down by financial crises created by their own interactions? Why can't formulaic rules and regulations prevent such crises? How can sophisticated models be so far off? How can one cope with the 'the unpredictability of collective action'? Posner provides insightful, honest, and very instructive real-world adventures in how 'to learn to live with extreme volatility,' as financial markets marched, trumpets blaring, into the quicksands of recursiveness.(Alex J. Pollock, American Enterprise Institute, and former president and CEO of the Federal Home Loan Bank of Chicago)
Posner's Stalking the Black Swan is an insightful integration of the emerging field of behavioral economics with real-world insights about financial markets. Posner combines true intellect, a fascinating professional background, and a critical mind to help us understand where laboratory insights hold up and where they might not. This book will be a valuable read for anyone interested in the role of behavioral economics in predicting market behavior.(Max H. Bazerman, Straus Professor, Harvard Business School, and author of Negotiation Genius (with Deepak Malhotra) and Judgment in Managerial Decision Making (with Don A. Moore))
Posner has drawn on his extensive experience as a first-rate analyst to examine the clues leading up to the recent meltdown of a number of once-respected financial institutions. But this is not a financial retrospective. He shows us how to combine numbers crunching with intuition, and he provides us with a set of disciplines to use in anticipating future Black Swan eventsboth positive and negativeand to profit accordingly.(Byron R. Wien, Blackstone Advisory Partners LP)
If you are looking for a well-written book which seeks to merge quantitative analysis, fundamental research, and human psychology, Stalking the Black Swanprovides a great resource to help you fine tune your investing framework for the volatile environment of our times.(Wall Street Cheat Sheet)
a wonderful read on how to think about, analyze, and react to extreme events.(Motley Fool)
Stalking the Black Swan provides a great resource to help you fine tune your investing framework for the volatile environment of our times.(Damien Hoffman Wall St. Cheat Sheet)
Stalking the Black Swan doesn't attempt to explain why or how the crisis happened, but instead offers practical, crisis-tested advice on methods for uncovering a similar looming disaster in your own portfolio.(Seeking Alpha)
A unique combination of psychology, statistics, and economics that will engage the reader unwilling to settle for quick answers.(Aswath Damodaran, New York University)
Top Customer Reviews
So what is so unique about Ken's investing philosophy? The concepts of value investing, information assimilation, behavioral finance, and probabilistic thinking are certainly not new - but the way he effectively stitches them together into an easy to understand and apply framework is. Most importantly, Ken's framework is far from static, and in my view, the biggest accomplishment of this book is that the reader comes away with a basic understanding of how to adapt Ken's framework based on the different analytic needs of each stock, rather than applying it mindlessly in checklist fashion. So while I view most other investing books as individual "tools" that investors can add to their investing "toolbox", Ken's book is the entire toolbox along with embedded knowledge on how to select the appropriate set of tools for each different job.Read more ›
He spends an entire chapter (8) on Monte Carlo simulation. But, he does not understand the basics of it. He states that Monte Carlo simulation generates probability trees with thousands or even millions of branches (pg. 178). No, that's not the case. A Monte Carlo simulation structured that way would never get off the ground. Even really powerful computers would most probably freeze because of the excess computational burden associated with billions of calculations. Instead, Monte Carlo simulation does not add one single branch to the original mapping of your model. But, it can change the probability of each branch (by specifying a distribution) and the input value of each branch (by turning variables into random ones). And, it can run millions of iterations. That's completely different and a lot less burdensome than creating a million of branches, as he states.
He mentions Principal Component Analysis (PCA) (pg. 191) and he states that PCA can map out the correlations in systems with large numbers of variables. No, it does not. Instead, it simply allows you to overcome multicollinnearity issues that often surface when you deal with a lot of variables. That's a different thing. Instead, you achieve what he is talking about with Pathway Analysis or a correlation matrix.
Besides misunderstanding quantitative methods, he makes numerous questionable statements. On pg.Read more ›
How do you deal with a world where the standard measure of volatility, the standard deviation, is ruled to be infinite and dangerous to rely upon for decision making? The Taleb solution is to hold mostly risk-free assets, buy out-of-the-money options, and wait. While this strategy may work for an individual, especially one with Taleb's skills, it cannot work for investors as a whole, for two reasons.
First, as soon as we all try to buy the out-of-the-money options, the return expected in Taleb's strategy will be arbitraged away. Second, returns come from owning assets with a claim on economic growth. Economic growth comes from productivity, which comes from innovation and change. Innovation and change bring risk--for both the innovators and the incumbent firms. If everyone holds the mostly risk-free-Taleb portfolio, who invests (owns) in risky assets?
It is here where Posner's book moves us forward. The book applies the steps of a classical approach: enumeration of outcomes, assignment of probabilities, incorporation of posterior information, and the application of prudent judgment to decisions that must be made in an uncertain world.Read more ›
Most Recent Customer Reviews
My review title says it all. The author's use of his own "ineffective" jobs as case studies is admirable. His writing and organising skills are not. Read morePublished 8 months ago by ServantofGod
Really excellent book. Concepts were very clear and the author gives invaluable real-world lessons on maximizing the accuracy of prediction as well as maximizing the chances of... Read morePublished 10 months ago by Dr. Horn
For a few years now, it seems that the norm is to be forced to wade knee deep in a white vapor exhaling morass of trivial and why not say it, silly books on business and economics,... Read morePublished on June 3, 2012 by Beau Sabreur
I recieved this book as a birthday present. If I had read Nassim Taleb's review first I wouldn't have wasted my time. Read morePublished on September 7, 2010 by Jack Raven Woodbutcher
What makes the book particularly valuable is the broad range of analytical approaches and the flexibility of thought that Ken advocates that investors employ to evaluate different... Read morePublished on June 24, 2010 by Michael D. Cohen
A great read for any fundamental investor looking at a world full of prospective blacks swans. We are strong believers in using decision trees in our investment process. Read morePublished on June 13, 2010 by Matthew T. Iorio
It's a shame this book wasn't around before the financial meltdown occurred. If the Wall Street gurus who thought the worst could never happen had read it and taken heed, many of... Read morePublished on June 12, 2010 by John M. Fisher
Beautifully reconciles the models to the mind. Stalking the Black Swan provides the map for understanding not what will happen next, but rather, how to recognize accurately and... Read morePublished on June 10, 2010 by A. A.
This is an unusual, excellent book. It combines practical advice with a sophisticated discussion of the mathematical, social, and psychological conditions that can cripple even... Read morePublished on June 1, 2010 by F. Miller