Adaptive markets Financial evolution at the speed of thought
Book - 2017
"Half of all Americans have money in the stock market, yet economists can't agree on whether investors and markets are ration and efficient, as modern financial theory assumes, or irrational and inefficient, as behavioral economists believe - and as financial bubbles, crashes, and crises suggest. This is one of the biggest debates in economics, and the value or futility of investment management and financial regulation hang on the outcome. In this groundbreaking book, Andrew Lo cuts through this debate with a new framework, the Adaptive Markets Hypothesis, in which rationality and irrationality coexist. Drawing on psychology, evolutionary biology, neuroscience, artificial intelligence, and other fields, "Adaptive Markets"...; shows that the theory of marked efficiency isn't wrong but merely 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."--Inside flap.
- Subjects
- Published
-
Princeton, New Jersey :
Princeton University Press
[2017]
- Language
- English
- Main Author
- Physical Description
- x, 483 pages, 8 unnumbered pages of plates : illustrations (some color), charts (some color) ; 25 cm
- Bibliography
- Includes bibliographical references (pages 421-462) and index.
- ISBN
- 9780691135144
- Introduction
- Financial Fear Factor
- Don't Try This At Home
- The Great Divide
- "It's the environment, stupid!"
- Revenge of the Nerds
- Chapter 1. Are We All Homo economicus Now?
- Tragedy and the Wisdom of Crowds
- A Random Walk through History
- The Birth of Efficient Markets
- Efficient Markets Unpacked
- What to Expect When You're Expecting
- Efficient Markets in Action
- Chapter 2. If You're So Smart, Why Aren't You Rich?
- Rejecting the Random Walk
- Risk versus Uncertainty and the Ellsberg Paradox
- Losing Hurts More than Winning Feels Good
- No-Limit Texas Hold era, Rogue Traders, and Regulators
- Probability Matching and March Madness
- Humans as Prediction Machines
- It Takes a Theory to Beat a Theory
- Culture Shock
- Chapter 3. If You're So Rich, Why Aren't You Smart?
- Looking under the Hood
- The Microscope of Neuroscience
- Fear
- Pain
- Pleasure and Greed
- Wired-Up Traders
- The Stuff Good Traders Are Made Of
- Mind over Money via Neural Currency
- I Want It All, and I Want It Now
- Chapter 4. The Power of Narrative
- A New Meaning of Rationality
- The Human Fire Alarm and Sprinkler System
- The Fear Factor and Finance
- I Know You Know That I Know
- Homo economicus and the Left Hemisphere
- The Prefrontal Cortex as CEO
- The Power of Self-Fulfilling Prophecies
- Barbara Ficalora, the Best Third Grade Teacher Ever
- Narrative Is Intelligence
- Chapter 5. The Evolution Revolution
- A Day at the Zoo
- The Evolution Revolution
- Just-So Stories or Scientific Fact?
- The Power of Selection
- Variety Is the Spice of Life
- "It's the environment, stupid!"
- The Emergence of Homo sapiens
- Enter Homo economicus
- An Evolutionary Pecking Order
- Swedish Twins and Savings
- Evolution at the Speed of Thought
- Sociobiology and Evolutionary Psychology
- Survival of the Richest?
- Chapter 6. The Adaptive Markets Hypothesis
- It Takes a Theory to Beat a Theory
- Simon Says Satisfice
- The Superman Jacket
- The Adaptive Markets Hypothesis
- Probability Matching Explained
- Nature Abhors an Undiversified Bet
- "It's the environment, stupid!" All Over Again
- Homo economicus and Idiosyncratic Risk
- The Origin of Risk Aversion
- Efficient versus Adaptive Markets
- Waylaid by Physics Envy
- On the Shoulders of Giants
- Chapter 7. The Galapagos Islands of Finance
- Quantum Mechanics
- Mission Impossible
- The Islands of Evolution
- Hedge Fund Archipelago
- An Evolutionary History of the Hedge Fund
- The Birth of Quants
- The Revenge of the Nerds
- Quant Goes Mainstream
- The Evolution of the Random Walk
- Cell Phones and Kerala Fishermen
- Chapter 8. Adaptive Markets in Action
- The Traditional Investment Paradigm
- The Great Modulation
- A New World Order
- Risk/Reward and Punishment
- The Democratization of Investing
- New Species of Index Funds
- Smart Beta versus Dumb Sigma
- Disbanding the Alpha Beta Sigma Fraternity
- The Random Walk Revisited
- A New Investment Paradigm
- The Quant Meltdown of August 2007
- Forensic Finance
- Adaptive Markets and Liquidity Spirals
- 1998 versus 2007
- Chapter 9. Fear, Greed, and Financial Crisis
- Ecosystem Ecology
- Financial Crisis 101
- Clear as Rashomon
- Not Enough Skin in the Game?
- Regulators Asleep at the Wheel?
- Red Pill or Blue Pill?
- Could We Have Avoided the Crisis?
- The Adaptive Markets Hypothesis Explains
- (Ab)Normal Accidents
- Liquidity Withdrawal Symptoms
- Chapter 10. Finance Behaving Badly
- Finance Rules
- Out-Ponzi-ing Ponzi
- The Ultimatum Game
- A Neuroscience of Morality?
- Is Finance Fair?
- Finance and the Gordon Gekko Effect
- Regulatory Culture
- Environment Strikes Again
- Moore's Law versus Murphy's Law
- The Tyranny of Complexity
- Chapter 11. Fixing Finance
- An Ounce of Prevention
- Ecosystem Management
- Adaptive Regulation
- Law Is Code
- Mapping Financial Networks
- The CSI of Crises
- Privacy with Transparency
- Anti-Gekko Therapies
- Chapter 12. To Boldly Go Where No Financier Has Gone Before
- Star Trek Finance
- "Computer, manage my portfolio!"
- Curing Cancer
- Eliminating Poverty
- A New Narrative
- I Want To Be Harvey Lodish
- Notes
- References
- Acknowledgments
- Index
