MIT Laboratory for Financial Engineering's Andrew Lo on why volatility is the biggest risk to your investments.

MIT Sloan Prof. Andrew Lo and fellow researchers have built models and algorithms that attempt to account for overconfidence in certain market sectors and extreme risk aversion in others: "The problem is that you can't manage what you don't measure," he says. "And since we don't have single measure of systemic risk, we can't say whether it is higher or lower today than it was before."...

David Warsh provides a list of four books about investing that he considers to be the best, including Andrew Lo and Jasmina Hasanhodzic's The Evolution of Technical Analysis: Financial Prediction from Babylonian Tablets to Bloomberg Terminals, which he says is destined to become a classic.

...The Commodity Futures Trading Commission should take an expansive view of its new powers to police disruptive trading practices, according to Andrew Lo, professor at MIT Sloan...

It's a challenging environment in which to make money—volatility is high, and returns are sideways to low. As investors proceed, they should consider the new world order of investment truths, as expressed in three basic principles outlined by Andrew Lo.

Andrew Lo is quoted about the shrinking size of the nation's stock market: "We should be very concerned about this trend. Capital markets are central to business formation and economic growth, and if listings are falling, that is a sign there is not the same level of capital formation as there was in the past."

MIT Sloan Prof. Andrew Lo is quoted about the potential risks of labeling companies which would be a necessary evil stemming from the Dodd-Frank financial reform bill: "I think that it could actually be quite dangerous and there could be a lot of unintended consequences to that process."...

The U.S. financial system is erratic and voracious, and keeps score in milliseconds. Andrew Lo says "The U.S. equity markets have become the Wild, Wild, West."

Andrew Lo says "I am worried about the potential instability that these technologies create in market dynamics. The U.S. equity markets have become the Wild, Wild West."

Andrew Lo says the OFR "should be a separate and independent agency" offering the National Transporation Safety Board as a hopeful example.

Risk management has begun to eclipse investment returns as the primary focus of a growing number of U.S. pension fund executives, reflecting lingering concerns over just how vulnerable institutional portfolios proved during the market's recent meltdown. MIT professor, Andrew Lo says that a growing number of institutional investors have "gotten religion," concluding they can't sit idly by and allow these volatility shocks to take them by surprise.

"Why would you equalize risks if some risks are not giving you proper rewards?" MIT Sloan Prof. Andrew Lo asks of risk parity funds.

Like a contemporary "whodunit" with a global crime scene, the financial meltdown has left behind countless victims, and lots of pointing fingers. The reasons for the collapse are debated by this group of estimable economists, some of whom worry that without really understanding what happened, we are in for a repeat episode.

"Economists desire to be able to explain 99% of all economic phenomena with three laws," says MIT Sloan Prof. Andrew Lo in a discussion on why economists envy physicists. "That's what physicists can do [in physics]. In fact, [in economics] we have 99 laws that explain maybe 3% of all phenomena"...