Adaptive markets
by Andrew W. Lo · first published 2017
62% recommend23% neutral15% critical
Why HN recommends it
Framework blending market efficiency with behavioral finance by treating markets as evolving ecosystems; suggested for readers wanting an accessible overview of efficient market theory versus behavioral views.
Summarised by Claude from recommending comments
"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 irrationalit
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> Extreme Ownership Jocko Willink and Leif Babin > Grant Ron Chernow > Straight Talk on Trade: Ideas for a Sane World Economy Dani Rodrik > Adaptive Markets: Financial Evolution at the Speed of Thought Andrew Lo > The Best Investment Writing, Volume 1: Selected Writing From Leading Investors and Authors by Meb Faber (editor), Jason Zweig (contributor),…
on “Annual survey of book recommendations” ↗Further reading on this in Adaptive Markets : Financial Evolution at the Speed of Thought. Has some theories around information flow and market participant behavior that permit edge to persist.
on “Grand jury indicts Trevor Milton, Nikola founder, on three counts of fraud” ↗…as a short can easily result in a loss higher than the entire value of the position. An interesting read if you'd like to go down the rabbit-hole of that ideology would be anything on the concept of 'Adaptive Markets' by Andrew Lo. Rather than the common physics/maths-based approach to market behavior, it focuses on a more biological one, and thus includes these 'emotional inefficiencies' that may be present in market…
on “Stock Markets Tumble Amid Worries Over Tech Firms and Trade Tensions” ↗Really interesting article. Reminds me a lot of the book Adaptive Markets (Adaptive Markets: Financial Evolution at the Speed of Thought https://www.amazon.com/dp/0691191360/ref=cm_sw_r_cp_api_glt_...)
on “Buying Slow, Selling Fast” ↗More finance related: 1. Finance by Andrew Lo from MIT 2. Adaptive Markets by Andrew Lo from MIT 3. Valuation by Aswath Damodaran NYU
on “Ask HN: What's the best lecture series you've ever seen?” ↗You should also read Adaptive Markets by Andrew Lo. It talks about how behavior psychology affects the markets, as Homo Economicus does not really exist, people are not rational actors individually or even at scale in other domains (see,…
on “Does Market Timing Work?” ↗…the same direction (such as risk aversion). Another POV that is aligned with the behavioral view is that the theory of evolution provides a good framework for thinking about markets. I like the book "Adaptive Markets" which also gives a good overview of EMH and behavioral finance so I'll recommend that as a reference. I think together with "A Random Walk Down Wall Street" you're set for "general framework of thought"…
on “Ask HN: Book recommendations for understanding financial systems?” ↗Adaptive Markets: Financial Evolution at the Speed of Thought. I believe it is an excellent book written in a format that is accessible by almost anyone interested in economics. If you think that a random walk down the…
on “Science Books of 2019” ↗If Andrew Lo's theory of adaptive markets is any good, why isn't he rich? This looks like dressed up technical analysis.
on “MIT Economist Has a New Theory of Finance” ↗…ignore my errors... I read a bunch of the books on the list the most interesting to me that I have not read for now are: - The Content Trap: A Strategist's Guide to Digital Change - Stealing Fire - Adaptive Markets: Financial Evolution at the Speed of Thought - The Inevitable: Understanding the 12 Technological Forces That Will Shape Our Future Has anybody here on HN read those? Are these any good? I am usually…
on “Annual survey of book recommendations” ↗…The only alternatives are the existing profit-machines like Google (Google X) or governments. I am also not the only one with this thought; Professor Andrew Lo of MIT has a final chapter in his book "Adaptive Markets" about how he might structure a similar "big problem solving fund" akin to the Vision Fund but with arguably bolder ambitions. https://www.amazon.com/Adaptive-Markets-Financial-Evolution-... https://publicpolicy.wharton.upenn.edu/live/news/2784-can-fi...…
Has anyone read Adaptive Markets? If so would you recommend it? I'm concerned about this line from the article: > Lo’s next step is to develop mathematical models to test the ability of his hypothesis to explain market behavior. Is…
on “MIT Economist Has a New Theory of Finance” ↗I found Adaptive Markets to be pretty weak. I was excited to read it, but I didn't finish it, because I found the content to be relatively facile and substanceless. YMMV, though.
on “MIT Economist Has a New Theory of Finance” ↗The book Adaptive Markets has a different theory, of markets driven by behavioral economic principles based on human psychology rather than assuming everyone is a Homo Economicus, a fully rational and efficient actor in the market.
on “Stock-Market Investors Can No Longer Count on the ‘Index Effect’” ↗