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
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.
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.
answer data measure nobody particular reason short
The short answer is, I don't know. Nobody knows. The reason for that is, we don't have enough data on the particular exposures we need to measure to answer that question.
comfort event few gm industry jury large next seen shocks small whether
Just because we didn't see an event (after GM and Ford) is small comfort. There are large exposures out there we haven't seen yet. I'd say the jury is still out on whether the industry can withstand the shocks that may come out over the next few months.
credit fairly five funds grown last
Credit derivatives and hedge funds have grown fairly spectacularly over the last five years.
five happened last market moves number rank tells
If you rank the top 50 one-day moves in the S&P 500, a fair number of those happened within the last five or 10 years. That tells you that we're in a different, riskier market now.
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.
afford instead might people
Some people might say, 'Can we afford it?' I think that's asking the wrong question... We should instead be asking, 'Can we really afford not to try?'
early hard learning matter ongoing remarkable remember simply struggled throughout
What makes this story so remarkable is that throughout my early childhood I had ongoing learning difficulties, particularly in mathematics. I struggled to learn the multiplication table, and no matter how hard I tried, I simply couldn't remember 6 times 7 or 7 times 8.
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.
best natural
Ideas percolate. Through natural selection, the best ones survive.
companies entire explain responsibility seems slick troubled
If troubled companies want to explain away 2008 as a 'black swan,' then someone should take responsibility for creating the oil slick that seems to have tarred the entire flock!
reject
I don't entirely reject the idea of efficient markets. It needs updating.