Came across  an interesting reference to The Black Swan (see my earlier entry) on MSN/Newsweek (Posted August 15)

Daniel Gross writes on “Speaking Hedgie: Translating the strange dialect of hedge-fund managers who are trying to explain big losses.”

Hedge-Fund Phrase: Unprecedented, unique circumstances
Translation: Stuff happens. But we had no clue.

Anyone who read the best seller The Black Swan  [I did, and highly recommend it] knows that random geopolitical, financial, and economic events can cause the prices of assets to move in ways that defy history and sophisticated computer models. But it comes as a shock to the brightest minds on Wall Street, especially those who run quantitative-based funds.

“Wednesday is the type of day people will remember in quant-land for a very long time,” Matthew Rothman, head of quantitative equity strategies for Lehman Brothers told the Wall Street Journal last week.

“Events that models only predicted would happen once in 10,000 years happened every day for three days.”

Strangely, these same models failed to predict the once-in-10,000-year events that roiled the markets in 1997, 1998, 2001, and 2002.

Daniel Gross writes for Newsweek and Slate, and has a book on economic bubbles, one of my new favorite subjects:

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