"As Congress tries to figure out how to speed up the drug approval process, a pair of economists [Andrew Lo and Vahid Montazerhodjat] are asking a different question: Are the criteria we use to choose which drugs are safe and effective too inflexible?

"At the core of this question are two kinds of mistakes that federal regulators can make when deciding whether or not to approve a new drug. The first is pretty straightforward: If they set the evidence bar too low, drugs that don't work and carry dangerous side effects could end up on the market. The second error is less obvious: If they set the bar too high, effective medicines may end up in the dustbin instead of in the hands of patients..."

Culture matters in economic life, and nowhere does it matter as much as in the world of finance. Although many economists acknowledge the importance of culture in shaping the world of finance, and in determining financial outcomes, very few have actually researched this issue carefully. A recent research paper by Andrew Lo of the MIT Sloan School of Management fills this gap.

The interaction between governance, culture and performance is increasingly a topic around asset owner board tables. But little has been written about the relationship between culture and the financial crisis, and how to change culture in financial services organisations. Andrew Lo, professor of finance at MIT, has come up with a proposal to change culture by drawing on traditional risk management protocols used at major financial institutions.

Why do people do bad things at work? A recent paper out from Andrew Lo, a finance professor at MIT's Sloan School of Management, suggests it might be a lot more about the corporate culture than the individuals themselves.

Studies show that emotions are inevitable, and maybe even necessary, when making decisions.

A new report from the Massachusetts Institute of Technology (MIT) is faulting the U.S. government for failing to maintain and grow its investments in basic scientific research, even as European and Asian nations are dramatically increasing their research and development (R&D) spending. Andrew Lo, a finance professor at the MIT Sloan School of Management and one of the report's authors, says the cutbacks in basic research could have a high cost in both national prestige and long-term economic opportunity.

In a New York Times profile published last Thursday, former Yale Investments Office analyst Zhang Lei GRD ’02 SOM ’02 chronicled his journey from interning under Swensen to managing one of the world’s most successful firms, Hillhouse Capital Group. The firm, which Zhang founded in 2005, now controls over $18 billion... MIT Finance professor Andrew Lo ’80 said that leveraging the skills and investment knowledge present in the alumni community is not a new phenomenon. “I think it is an advantage because alumni are quite loyal to the university so they have additional motivation for participating in supporting the endowment activity,” Lo said. “We have seen this not only at Yale, but at other universities as well, where if you look at the investment committee of endowments, they are populated with alumni who are talented in the investment industry and are willing to give their services and expertise.”

“Smart beta” funds are trying to outsmart your active manager. But individual investors who are drawn to them should also make sure they don’t get outsmarted themselves... “Smart beta is often accompanied by dumb sigma,” [Professor Andrew Lo] says, meaning additional risk that is unnecessary and which investors may not be rewarded for. “When you have multiple sources of beta, you also have multiple sources of risk. Illiquidity risk, for example, can often be a companion to smart beta.”

Freezing rain is falling on the sidewalks at Vanguard Group’s sprawling suburban campus outside Philadelphia, but it doesn’t slow down company founder John C. “Jack” Bogle as he hustles from his office to the cafeteria for lunch. A slew of money managers and academics—Robert Arnott of Research Affiliates, for example, and Andrew Lo at AlphaSimplexGroup—say they’re building on what Bogle created.

For the first time since 2002, Yale is no longer the second wealthiest institution of higher education in the nation. While some experts interviewed said Yale’s drop in rankings is not a cause for concern, others argued that large, public institutions may increasingly challenge private universities when it comes to endowment size. “Yale is still a dominant force in the endowment world,” Massachusetts Institute of Technology finance professor Andrew Lo ’80 said. “Texas is a very big state and there is lots of opportunity to grow their asset base, while Yale is in the midst of using funds for new buildings — it is all part and parcel of that dynamic.”

U.S. securities regulators have tapped a list of well-known stock market experts to serve on a new advisory panel tasked with helping shape rules affecting high-speed traders and dark pools.

For years, Brad Margus has juggled two goals as chief executive: Make money, and find cures for his children. He just co-founded a startup, Exigence Neurosciences Inc., in part to seek treatments for his two sons who have ataxia-telangiectasia or A-T, a rare progressive and eventually fatal neurological disease... “The amount of money needed to develop a single drug is so much more than what pure altruism can fund,” says Andrew Lo.

When trying to understand how the market is working, we should think not only of bulls and bears, but also of dodos. Our aversion to risk comes from the deep biological imperatives that have allowed humans to avoid extinction. Any theory of markets must take account of this.

That, at least, is the radical prognosis of Andrew Lo, of the MIT Sloan school of business, who has for years worked on an ambitious project to apply biology to finance. His latest paper, published with several colleagues, provides mathematical equations to show how risk-averse behaviour is necessary for survival. That means that investors in markets will take risk-averse actions rather than the purely rational decisions that economists have classically assumed.

The financial system has gotten much more complex, but many financial regulations are from the 1930's and 40's, notes Andrew Lo, professor at the MIT Sloan School of Management. Lo helped come up with the idea for the U.S. Office of Financial Regulation, which was created by the 2010 Dodd Frank Act. Nonetheless, much of Dodd Frank is way too long and difficult for anyone to understand, Lo contends. 'That wasn't so much an update as it was a piling on of new regulations,' Lo says of Dodd Frank.