Adaptive Markets: Financial Evolution at the Speed of Thought

Economists are divided on whether investors and markets are rational and efficient or irrational and inefficient. Andrew Lo's Adaptive Markets Hypothesis suggests that rationality and irrationality coexist, with investors reacting instinctively to unstable markets, creating inefficiencies for others to exploit. This new paradigm explains how financial evolution shapes behavior and markets at the speed of thought.

Format: Paperback / softback
Length: 504 pages
Publication date: 14 May 2019
Publisher: Princeton University Press

A new and revolutionary explanation of markets and investor behavior has emerged, challenging the prevailing views of economists. While half of all Americans invest in the stock market, there is a heated debate among experts regarding whether investors and markets are rational and efficient, as modern financial theory suggests, or irrational and inefficient, as behavioral economists argue. This debate holds immense significance in economics, as the value and effectiveness of investment management and financial regulation hinge on the answer. In his groundbreaking book, Andrew Lo presents a transformative framework that challenges the notion of markets as purely rational entities. Through the lens of psychology, evolutionary biology, neuroscience, artificial intelligence, and other fields, Adaptive Markets unveils that the theory of market efficiency is incomplete. When markets experience instability, investors react instinctively, leading to inefficiencies that others can exploit. Adaptive Markets offers a fresh perspective by explaining how financial evolution shapes behavior and markets at the speed of thought, as evidenced by the fluctuations between stability, crisis, profit, loss, and innovation, and regulation. This book is a must-read for anyone seeking to gain a deeper understanding of how markets truly function, providing an ambitious and essential answer to fundamental questions about economics and investing.

Weight: 798g
Dimension: 158 x 233 x 32 (mm)
ISBN-13: 9780691191362