{"id":5797,"date":"2013-05-28T12:42:03","date_gmt":"2013-05-28T19:42:03","guid":{"rendered":"http:\/\/www.blackswanreport.com\/blog\/?p=5797"},"modified":"2013-05-28T12:42:03","modified_gmt":"2013-05-28T19:42:03","slug":"when-smart-investors-do-stupid-things","status":"publish","type":"post","link":"https:\/\/www.blackswanreport.com\/blog\/2013\/05\/when-smart-investors-do-stupid-things\/","title":{"rendered":"When Smart Investors Do Stupid Things"},"content":{"rendered":"<blockquote>\n<p>The article closes by asking, &#8220;how long can they produce those kinds of returns before suffering some spectacular crash?&#8221;<\/p>\n<p>We now know the answer: about a year.<\/p>\n<p>LTCM was a glaring reminder that past volatility is a terrible measure of future risk. Yet we still obsess over volatility, convinced that it tells us how safe an investment is.<\/p>\n<p>Nassim Taleb describes using volatility as a measure of risk as the &#8220;turkey problem.&#8221; He writes in his book Antifragile:<\/p>\n<p><em>A turkey is fed for a thousand days by a butcher; every day confirms to its staff of analysts that butchers love turkeys &#8220;with increased statistical confidence.&#8221; The butcher will keep feeding the turkey until a few days before Thanksgiving. Then comes that day when it is really not a very good idea to be a turkey.<\/em><\/p>\n<p>So if volatility isn&#8217;t a good measure of risk, what is?<\/p>\n<\/blockquote>\n<p>via <a href=\"http:\/\/www.fool.com\/investing\/general\/2013\/05\/14\/when-smart-investors-do-stupid-things.aspx\">When Smart Investors Do Stupid Things<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The article closes by asking, &#8220;how long can they produce those kinds of returns before suffering some spectacular crash?&#8221; We now know the answer: about a year. LTCM was a glaring reminder that past volatility is a terrible measure of future risk. Yet we still obsess over volatility, convinced that it tells us how safe [&hellip;]<\/p>\n","protected":false},"author":8,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[165],"tags":[316,723],"class_list":["post-5797","post","type-post","status-publish","format-standard","hentry","category-investing","tag-risk","tag-turkey-problem"],"_links":{"self":[{"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/posts\/5797","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/comments?post=5797"}],"version-history":[{"count":1,"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/posts\/5797\/revisions"}],"predecessor-version":[{"id":5798,"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/posts\/5797\/revisions\/5798"}],"wp:attachment":[{"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/media?parent=5797"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/categories?post=5797"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.blackswanreport.com\/blog\/wp-json\/wp\/v2\/tags?post=5797"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}