A Performance Evaluation of Black Swan Investments.

Abstract

This thesis evaluates an investment strategy that involves investing in ten out of the 30 most traded stocks listed on the Stockholm Stock Exchange, exploiting the market’s reaction to unpredicted events, so called Black Swans. By investing in ten of the stocks with the largest price change after days with extreme negative returns and ten of the stocks with the least change in price after extreme positive returns, the strategy outperforms the market. The authors also evaluate standard deviation (SD) as a risk measurement, finding that it captures the relationship between risk and return during volatile market periods.