Adaptive Markets
Adaptive Markets is a new, evolutionary explanation of markets and investor behavior. Drawing on psychology, evolutionary biology, neuroscience, artificial intelligence, and other fields, this book shows that the theory of market efficiency is incomplete. This new paradigm explains how financial evolution shapes behavior and markets at the speed of thought. 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.
“A fascinating read, cogently situating financial behavior within what we know about human behavior and evolutionary history.”
― Diane Coyle, Nature
“[A] remarkable new book. . . . [Lo’s] insights should allow investors and regulators alike to manage risks better. They should read it.”
― John Authers, Financial Times
“Lo’s book offers a unique way to think about the idea of ‘efficient markets’―a new hypothesis worth considering about how markets can be rational and irrational at the same time.”
― Andrew Ross Sorkin, New York Times
“A convincing argument.”
"Andrew Lo combines wonderfully broad scholarship and a delightfully instructive style to present dramatically new perspectives on how markets work and how they can be regulated more effectively. This important book will teach and entertain, and should influence those charged with keeping markets healthy."
― Simon A. Levin, Princeton University
"Adaptive Markets will appeal to anyone who distrusts dogmatic economic theories and thirsts for a coherent view of how market economies produce both great gain and great pain for societies. Andrew Lo integrates a deep understanding of finance with a broad knowledge of biology, psychology, and ethics to offer a tantalizing vision of how financial engineering could become a powerful force for a more just, healthy, and prosperous world."
― Peter Hancock, President and CEO, AIG
"We tell stories, we learn from them, and we make them up. In this magnificent book, Andrew Lo explains how our attraction to stories drives markets, explains past catastrophes, and suggests future opportunities for world-saving financial engineering. And he packages it all in fascinating stories of his own."
― Patrick Henry Winston, Massachusetts Institute of Technology
"Andrew Lo is a brilliant financial economist, visionary innovator, bold contrarian, gifted writer, and an unrelenting idealist. These traits are evident in this wonderful book, which traces the 'evolutionary explosion of financial innovation' that began with Vanguard's creation of the first index mutual fund in 1974, tracking the S&P 500 index. I continue to hold to index funds, but Dr. Lo's book persuades me to keep a mind that is open--or at least ajar--to the new world of investment technology, investor preferences, and transaction efficiency, and to the wisdom of those who are smarter than I am."
― John C. Bogle, founder of the Vanguard Group and the First Index Mutual Fund, and author of The Little Book of Common Sense Investing
"This is a wonderful book. Andrew Lo traces a journey in which he reconsiders rationality in economics, moving from the efficient market hypothesis to his own Adaptive markets Hypothesis through psychology, neuroscience, biology, and studies of financial innovations and crises. The book presents many valuable findings and is also full of emotion--enthusiasm, joy, frustration, and pain. It is itself a manifestation of the important finding that rational thinking and emotion go together."
― Nobuhiro Kiyotaki, Princeton University