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The Fallacy of Rare Events and Fat Tails [Premium Articles]

Rare events such as the 1987 stock market crash or the Google stock drop of last Friday are unpredictable. Those who try to convince investors and traders to constantly plan for such events essentially attempt to neutralize them and turn them into spectators of the markets. Realizing returns above risk-free return becomes very difficult for those who constantly anticipate rare events and try to minimize their financial impact.

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