Andrew Lo
Andrew Lo
Andrew Wen-Chuan Lois the Charles E. and Susan T. Harris Professor of Finance at the MIT Sloan School of Management. Lo is the author of many academic articles in Finance and Financial economics...
ProfessionEconomist
answer brain economic finance hit inside people questions research running understand
Finance and economic research has hit a wall. We can't answer any more questions by running another regression analysis. Now, we need to get inside the brain to understand why people make decisions.
direction good longer money number obvious park past produced returns sidelines sitting smart strategies waiting
At this point, there isn't an obvious place to park money, ... A number of strategies that produced good returns in the past are no longer profitable. A lot of the smart money is sitting on the sidelines right now just waiting for the direction to change.
engaged good horrified people
Most people are overconfident about their own abilities. That is probably a good thing. But we would be horrified if a physician's aide engaged in heart surgery.
efficiency extreme extremes fear generate market periods proper
During periods of extreme fear or greed, you don't have the proper balance between those two to generate market efficiency and you get extremes in behavior.
people perceive understand
It's important to understand how people perceive risk, and how that translates into investment behavior.
adaptive change depending develop engaged hypothesis investors markets population says time
The adaptive markets hypothesis says that all economic institutions, like our own species, develop and change over time, depending on the population of investors that are engaged with them.
probability-theory risk management
Maybe we should teach schoolchildren probability theory and investment risk management.
technology labor cheaper
Labor is getting more expensive and technology is getting cheaper.