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Adaptive Markets
Financial Evolution at the Speed of Thought
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Andrew W. Lo
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Afterword by:
Andrew W. Lo
Language:
English
Published/Copyright:
2019
About this book
A new, evolutionary explanation of markets and investor behavior
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. The debate is one of the biggest in economics, and the value or futility of investment management and financial regulation hangs on the answer. In this groundbreaking book, Andrew Lo transforms the debate with a powerful new framework in which rationality and irrationality coexist—the Adaptive Markets Hypothesis. Drawing on psychology, evolutionary biology, neuroscience, artificial intelligence, and other fields, Adaptive Markets shows that the theory of market efficiency is incomplete. When markets are unstable, investors react instinctively, 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. An ambitious new answer to fundamental questions about economics and investing, Adaptive Markets is essential reading for anyone who wants to understand how markets really work.
Author / Editor information
Andrew W. 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. He is the author of Hedge Funds and the coauthor of A Non-Random Walk Down Wall Street (both Princeton), among other books.
Reviews
"[Adaptive Markets] delivers an important contribution to the ongoing discussion about the EMH in a very entertaining way."---Christoph Kaserer, Journal of Economics
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"[Adaptive Markets] is very well written, striking a right balance between education and teaching."---Mathis Mörke, Markets and Portfolio Management
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"One of Bloomberg’s Best Books of 2017, chosen by Robert Shiller"
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"One of Bloomberg’s Best Books of 2017, chosen by Vitor Constancio"
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"One of Financial Times (FT.com) Best Books of 2017: Economics"
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"One of the Microsoft Best Business Books of 2017"
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"One of The Wall Street Journal’s What Business Leaders Read in 2017"
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"One of MoneyWeek’s “Five of the best books of 2017” (chosen by Dr. Matthew Partridge)"
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"One of Exame’s “9 books that will help you get rich in 2018”"
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"One of The New York Times Deal Book “Business Books Worth Reading” 2017 (chosen by Andrew Sorkin)"
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"One of Foreign Affairs Best of Books 2017 – Economic, Social, and Environment / Finance"
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"One of the CNBC 13 Best Business Books of 2017"
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"Shortlisted for the 2017 Financial Times and McKinsey Business Book of the Year Award"
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"Finalist for the 2017 TIAA Paul A. Samuelson Award, TIAA Institute"
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"Winner of the 2018 PROSE Award for Business, Finance & Management, Association of American Publishers"
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"Winner of the 2018 PROSE Award for Excellence in Social Sciences, Association of American Publishers"
Topics
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Frontmatter
i -
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Contents
vii -
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Adaptive Markets
xi -
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Introduction
1 -
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CHAPTER 1. Are We All Homo economicus Now?
12 -
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CHAPTER 2. If You’re So Smart, Why Aren’t You Rich?
45 -
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CHAPTER 3. If You’re So Rich, Why Aren’t You Smart?
75 -
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Chapter 4. The Power of Narrative
102 -
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Chapter 5. The Evolution Revolution
135 -
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Chapter 6. The Adaptive Markets Hypothesis
176 -
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Chapter 7. The Galapagos Islands of Finance
222 -
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Chapter 8. Adaptive Markets in Action
249 -
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Chapter 9. Fear, Greed, and Financial Crisis
296 -
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Chapter 10. Finance Behaving Badly
330 -
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Chapter 11. Fixing Finance
365 -
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Chapter 12. To Boldly Go Where No Financier Has Gone Before
395 -
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Afterword
421 -
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Notes
427 -
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References
445 -
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Acknowledgments
469 -
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Index
475
Publishing information
Pages and Images/Illustrations in book
eBook published on:
June 4, 2019
eBook ISBN:
9780691196800
Edition:
2nd edition
Pages and Images/Illustrations in book
eBook ISBN:
9780691196800
Keywords for this book
Investor; Adaptive market hypothesis; Efficient-market hypothesis; Homo economicus; Financial crisis; Hedge fund; Prediction; Finance; Economist; Financial technology; Probability; Behavioral economics; Investment; Stock market; Financial services; Market (economics); Technology; Year; Calculation; Behavior; Random walk hypothesis; Financial economics; Economics; Central bank; Financial crisis of 2007–08; Financial institution; The Wisdom of Crowds; Share price; Result; Risk aversion; Competition; Venture capital; Fraud; Systemic risk; Human behavior; Currency; Career; Bank; Macroeconomics; Speculation; Income; Uncertainty; Hedge Fund Manager; Risk management; Insider; Psychology; Portfolio manager; Asset; Market maker; Heuristic; Funding; Warren Buffett; Customer; Saving; Financial innovation; Wealth; Bank run; Trader (finance); Employment; Probability matching; Entrepreneurship; Thought; Ecosystem; Trade-off; Theory; Market Dynamics; Rationality; Myron Scholes; Prefrontal cortex; Scientist
Audience(s) for this book
For an expert adult audience, including professional development and academic research
