Taming The Black Swan

Last week we had the pleasure of welcoming Dr. Martin Lockstrom of Quantcore Capital Management to our office, who spoke about Black Swan events and how to generate long-term returns. The presentation provided insight into the reasoning, motivation, and design of his algorithmic trading strategies. ​

He spoke in detail about the characteristics of a black swan event, and the uncertainty that it brings to investing. A black swan is an event that comes as a surprise (to the observer) and has a momentous market effect. After the event has been recorded for the first time, is often rationalized in hindsight, as if it could have been expected. The term is based on an ancient saying that presumed black swans didn’t exist – a saying that became reinterpreted to teach a different lesson after black swans were discovered in the wild. Examples include the dot com bubble in the early 2000's, and the real estate bubble in 2007/2008. ​

To prevent these catastrophic losses, Dr. Lockstrom explained how his algorithmic trading system is designed to withstand, and even gain, from black swan events. By taking human emotion and impatience out of the equation, the results of these strategies can outperform the general market on a risk-adjusted and absolute basis.
The lessons from Dr. Lockstrom’s presentation can be applied to a wide range of investment philosophies, and we hope everyone enjoyed as much as we did! ​