Economist Andrew Lo talks to the FT's John Authers about his adaptive markets hypothesis, the idea that markets develop and adapt over time and should be modelled using concepts from biology instead of physics. It's the subject of his recent book, Adaptive Markets: Financial Evolution at the Speed of Thought.
There are two popular schools of thought when it comes to how markets work. There's the efficient markets hypothesis (EMH) which says that it's basically impossible to beat the market, because all information is completely priced in at all times (more or less). On the other side is an increasingly popular behavioral view which argues that various human emotions and biases are always creating situations that aren't justified by the data. On this week's episode of the Odd Lots podcast, we speak to Andrew Lo, a professor of Finance at the MIT Sloan School of Management about his own theory, which he calls Adaptive Markets. The theory attempts to bridge the behavioral approach with the efficient markets view. He argues that the proper way to view the market is through an ecological lens, examining the players as flora and fauna of a complicated system, to help determine who's thriving, who's dying, and where asset prices will go.
Our latest Freakonomics Radio episode is called “‘How Much Brain Damage Do I Have?’” John Urschel was the only player in the N.F.L. simultaneously getting a math Ph.D. at M.I.T. But after a new study came out linking football to brain damage, he abruptly retired. Here’s the inside story — and a look at how we make decisions in the face of risk versus uncertainty.
Bloomberg View columnist Barry Ritholtz interviews Andrew Lo, director of the Laboratory for Financial Engineering and the Charles E. and Susan T. Harris Professor at the MIT Sloan School of Management. Lo holds a bachelor’s degree in economics from Yale University and a doctorate in economics from Harvard University. This commentary aired on Bloomberg Radio.
Andrew Lo is the Charles E. and Susan T. Harris Professor at the MIT Sloan School of Management and director of the MIT Laboratory for Financial Engineering. In his research, he straps sensors to traders and watches how their pulses and body temperatures change when markets dive or trades go bad. The technology could be used elsewhere in a bank to potentially address problems before they escalate.
Andrew Lo, Professor of Finance at the MIT Sloan School of Management and the director of MIT's Laboratory for Financial Engineering, discusses his recent paper The Gordon Gekko Effect, corporate culture, and why biology is an increasingly relevant framework for understanding the financial markets.
Professor Andrew W. Lo discusses his proposal to use financial engineering to spread risks among investors and provide financial incentives to develop successful cancer treatments. He explains how the cancer megafund works, and how investors can make good money in finding a cure for cancer.
Andrew W. Lo and his coauthors (Robert C. Merton, Monica Billio, Mila Getmansky, Dale Gray and Loriana Pelizzon) discuss the interconnectedness of global markets and the need for policy integration in a Financial Analysts Journal piece, “On a New Approach for Analyzing and Managing Macrofinancial Risks,” which appears in the March/April 2013 issue. Abby Farson Pratt, assistant editor at CFA Institute, recently talked with Lo about his team’s research as part of a series of FAJ author interviews.
Andrew Lo, an economist and finance professor at the Massachusetts Institute of Technology's Sloan School of Management, discusses how behavioral issues can influence investors. Lo talks with Bloomberg's Pimm Fox and Vonnie Quinn on Bloomberg Radio's "Taking Stock."