Adaptive Markets

Financial Evolution at the Speed of Thought

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The Book

Adaptive Markets was more than 20 years in the making. Having been introduced to the Efficient Markets Hypothesis as an economics Ph.D. student, Andrew W. Lo struggled to reconcile the gap between this beautiful theory and its sometimes-less-compelling empirical implications. In 1988, together with A. Craig MacKinlay, Lo published “Stock Market Prices Do Not Follow Random Walks: Evidence from a Simple Specification Test,” documenting significant amounts of predictability in the seemingly random motion of U.S. stock markets. After a decade of attempts to explain away this predictability, he published his very first article proposing to view financial markets through an evolutionary lens, together with J. Doyne Farmer, in the 1999 Proceedings of the National Academy of Sciences. That marked the beginning of Lo’s efforts to reconcile market efficiency with human behavior, and Adaptive Markets is the culmination of that process of discovery and analysis.

Half of all Americans have money in the stock market, yet economists can’t agree on whether investors and markets are rational and efficient, as modern financial theory assumes, or irrational and inefficient, as behavioral economists believe—and as financial bubbles, crashes, and crises suggest. This is one of the biggest debates in economics and finance and the value or futility of investment management, stock market research, financial advice, and financial regulation hang in the balance.

To resolve this decades-old debate, Lo’s formulation of the Adaptive Markets Hypothesis gradually broadened his research agenda to include the study of psychology, evolutionary biology, neuroscience, artificial intelligence and other fields that offer insight on human behavior.

Adaptive Markets shows that the theory of market efficiency isn’t wrong, but merely incomplete. When markets are unstable, investors often react instinctively rather than rationally, creating inefficiencies for others to exploit. Lo’s new paradigm explains how financial evolution shapes behavior and markets at the speed of thought—a fact revealed by swings between stability and crisis, profit and loss, and innovation and regulation.

Adaptive Markets starts with the origins of market efficiency and its many successes as well as its limits, turns to the neuroscientific and evolutionary foundations of investor behavior, and concludes with several practical implications—including how hedge funds have become the Galápagos Islands of finance, what really happened in the 2008 Financial Crisis, and how we might avoid future crises.


  • SPEAR’S: “Review: Adaptive Markets by Andrew Lo” | READ
  • NABE: “Adaptive markets: financial evolution at the speed of thought
    by Andrew Lo” | READ
  • Fintech Finance: “Can the Market be Both Rational and Irrational?” | READ
  • The Enlightened Economist: “Fear, Greed, Fairness, Imagination and Finance” | READ
  • Reuters: “Review: We’re All Behaviorists Now – So What?” | READ
  • Foreign Affairs: “Capsule Review” |READ
  • Financial Times: “Adaptive Markets, by Andrew Lo — Emotional Investment Theory” |READ
  • MoneyWeek: “Book review: Adaptive Markets” | READ
  • City Journal: ” Emotions and Economics” | READ
  • Advisor Perspectives: “What We Can Learn from Andrew Lo’s Adaptive Markets” | READ
  • “Swedroe: Beyond Efficient Markets” | READ
  • CFA Institute: “Adaptive Markets: Financial Evolution at the Speed of Thought (a review)” | READ
  • Nature: “Summer Books” | READ
  • “The Human Side of Markets” | READ
  • Brandon Renfro: “Adaptive Markets” | READ



  • The Economist: “The Evolutionary Element of Markets” | READ
  • MIT Sloan: “Why Financial Markets Behave Like Living Organisms” | READ
  • “Andrew Lo’s Theory to Beat a Theory” | READ
  • De Tijd: “We hebben een beursalarm nodig” | READ
  • Business Insider: “Adaptive Market Hypothesis: Andrew Lo’s Groundbreaking Work Combining Rational And Behavioral Market Theory” | READ
  • El economista: “Una nueva visión de mercados financieros adaptativos” | READ
  • Nautilus: “To Become a Better Investor, Think Like Darwin” | READ
  • IPE: “Interview: Andrew Lo, MIT Sloan School” | READ
  • Clarín economía: “¿Pueden los mercados y los economistas vencer el cáncer?” | READ
  • Exame: “Darwin explica Wall Street? Este economista do MIT diz que sim” | READ
  • The Economist: “Evolving Ideas” | READ
  • Bloomberg Businessweek “This MIT Economist Has a New Theory of Finance” | READ
  • The Atlantic: “How Evolution Can Make Sense of the Stock Market” | READ
  • Seeking Alpha: “MIT’s Andrew Lo On Adaptive Markets, Passive Indexing, And Systemic Shocks” | READ
  • Project Syndicate: ” Economics in Transition” | READ


  • Wall Street Journal Money Beat: “Andrew W. Lo Talks How to Evolve With ‘Adaptive Markets'” | READ
  • Financial Times Alphachat: “Buy, Sell or Adapt” | READ
  • Financial Times Alphachat: “ENCORE: Andrew Lo on adaptive markets” | READ
  • Capital Ideas: “Efficient Markets Reconsidered” | READ
  • Financial Times: “Business Books Podcast: Andrew Lo on ‘Adaptive’ Markets” | READ
  • CFA Institute: “The Adaptive Markets Hypothesis: A Financial Ecosystems Survival Guide” | READ


  • MarketWatch: “This is Your Brain on Stocks” | READ
  • Evonomics: “It Takes a Theory to Beat a Theory: The Adaptive Markets Hypothesis” | READ
  • Financial Times: “Insight: When the Wisdom of Crowds Becomes the Madness of Mobs” | READ

Awards and Recognition

  •  Winner of the 2018 PROSE Award for Excellence in Social Sciences, Association of American Publishers | READ
  • Winner of the 2018 PROSE Award for Business, Finance & Management, Association of American Publishers | READ
  • Finalist for the 2017 TIAA Paul A. Samuelson Award, TIAA Institute
  • One of the CNBC 13 Best Business Books of 2017 | READ
  • One of Foreign Affairs Best of Books 2017 – Economic, Social, and Environment / Finance | READ
  • One of The New York Times Deal Book 2017 “Business Books Worth Reading”, chosen by Andrew Sorkin | READ
  • One of Exame’s “9 books that will help you get rich in 2018”
  • One of MoneyWeek’s “Five of the best books of 2017”, chosen by Dr. Matthew Partridge | READ
  • One of The Wall Street Journal’s What Business Leaders Read in 2017 | READ
  • One of the Microsoft Best Business Books of 2017 | READ
  • One of Financial Times ( Best Books of 2017: Economics | READ
  • One of Bloomberg’s Best Books of 2017, chosen by Mohamed El-Erian | READ
  • One of Bloomberg’s Best Books of 2017, chosen by Robert Shiller | READ
  • Shortlisted for the 2017 Financial Times and McKinsey Business Book of the Year Award | READ
  • Forbes “What Seven Of The Best Business Books Of 2017 Taught Us This Year” | READ
  • Business Insider “The 6 Best Business Books of 2017, According to Economists, Editors, and Professors” | READ
  • Business Insider “The 19 Best Business Books of 2017” | READ
  • “The Best Business Books of 2017” | READ
  • Financial Post “Five Books for the Investor or Economist on Your Last-minute Shopping List” | READ

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