Some assumptions:
Mr.Market is 20 years old, earns Rs.20,000 per month, married with one child and is the sole earning member of the family.
Mr.Market started earning from the age of 20. From the age of 20 to 30 i.e. 10 years, Mr.Market's earnings were increasing year after year and assumed that it ought to increase in future also.
But something happened after 10 years and 1 day i.e. when Mr.Market is 30 years and 1 day old, Mr.Market dies(Mystery death).
Mr.Market's earnings before and after the surprise event.
Suddenly, the belief of Mr.Market's family members changes.
Why?
There was a unexpected, uncertain surprise that shocked Mr.Market's family.
This is nothing but The Black Swan - The impact of highly improbable.
Why it is called Black Swan?
People in the earlier century believed that all swans were white because of the confirmation with the past historical records and what they saw i.e. swans had white feathers.
This belief was true only till the time of spotting the first Black Swan.
Characteristics of the Black swan event:
Random
Uncertain
Difficult to predict
High Impact
Rare
Surprising
In the above example, just change the age and earnings with a company's share price over years.
Examples:
Satyam Computer
Himachal Futuristic
DSQ Software
Lehman Brothers
The belief of the investors in these companies might have surely changed after The Black Swan event.
Reference: The Black Swan
