A central challenge to the efficient markets hypothesis is the existence of stock market anomalies. Andrew Lo says: "If the Efficient Markets Hypothesis in its classical form seems to be violated so often, maybe we economists ought to re-examine our theory instead of arguing that the world is crazy."
There's high-frequency trading, and now there's high-frequency crashing. But identifying the causes of the 6th May 2010 'flash crash' has proved to be a relatively slow process. Bob Giffords goes in search of causes, outcomes, explanations and lessons to be learned. Andrew Lo gives his take on it.
The Retirement Income Summit, a gathering of financial advisers this spring, confirmed that employers committed to educating workers about saving for retirement have a lot on their plate, both now and in the years to come. Andrew Lo, a professor at MIT, cited a study that found as people age they begin to make poor financial decisions.
"We need a vibrant OTC swaps market for the global economy, but there are systemic issues that need to be considered," says MIT Sloan Prof. Andrew Lo in a story on the methods big banks use to price over-the-counter derivatives, potentially to their own advantage...
When the rest of the world was busy buying second homes with no money down, MIT professor Andrew Lo was busy beating the drum over a coming financial crisis. For a while, he was playing to an empty room, but now his prescience makes him a voice of authority as we deal with the meltdown and its aftermath. Fortune recently spoke with Lo about the goods and bads of financial reform, how to prepare for calamities to come, and the "holy grail" of good regulation...
"Humans may be more sophisticated than animals, but we are nevertheless animals, subject to the same kind of forces that nature has built into all of creation," says MIT Sloan Prof. Andrew Lo of behavior affecting adaptive markets.
This story on a recent paper co-authored by MIT Sloan Prof. Andrew Lo describes his proposal for a five-tiered organization of uncertainty to more effectively understand and calculate risk in economic systems.
"What we thought was diversified became very highly correlated because of the global integration of the financial markets. Assets we thought were uncorrelated have moved together, so we have to be much more thoughtful about asset allocation," says MIT Sloan Prof. Andrew Lo.