Trading and Fat Tails
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.
Copyright (c) 2016 Robert I Webb
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
Authors submitting articles for publication warrant that the work is not an infringement of any existing copyright and will indemnify the publisher against any breach of such warranty. By publishing in Applied Finance Letters, the author(s) retain copyright but agree to the dissemination of their work through Applied Finance Letters.
By publishing in Applied Finance Letters, the authors grant the Journal a Creative Commons nonexclusive worldwide license (CC-BY-NC-ND: Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License) for electronic dissemination of the article via the Internet, and, a nonexclusive right to license others to reproduce, republish, transmit, and distribute the content of the journal. The authors grant the Journal the right to transfer content (without changing it), to any medium or format necessary for the purpose of preservation.
Authors agree that the Journal will not be liable for any damages, costs, or losses whatsoever arising in any circumstances from its services, including damages arising from the breakdown of technology and difficulties with access.