Trading and Fat Tails

  • Robert I Webb University of Virginia
Keywords: fat tails, extreme events, stock price behaviour


Sudden, large price changes periodically occur in speculative markets. Many of these large price moves simply reflect the market’s reaction to new fundamental economic information-- as financial theory would predict. However, some of the most extreme price moves—often characterized (albeit incorrectly) as “Black Swans” in popular parlance--reflect more the predictable behavior of traders in certain situations or poorly designed market microstructures than the arrival of new fundamental information. These trading-induced price moves have important implications for practitioners, policymakers and academics alike.


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Author Biography

Robert I Webb, University of Virginia

Robert I. Webb is the Paul Tudor Jones II Research Professor at the McIntire School of Commerce at the University of Virginia in Charlottesville, Virginia, USA.

How to Cite
Webb, R. I. (2016). Trading and Fat Tails. Applied Finance Letters, 1(1), 2-7.
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