Half of all Americans have money in the stock market, yet economists can’t agree on whether investors and markets are rational 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 W. 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 market 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.
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"Quite a broad and interesting discussion that wends its way through a myriad of initially disjoint topics that ultimately end up at the same place. Finance is a topic that usually glazes my eyes over, but Lo has managed to talk about credit default swaps and what-have-you in a manner that is engaging, sometimes terrifying, sometimes funny; but always on point.
Any technical jargon is explained quite clearly & no previous knowledge is assumed - so it's quite accessible to anyone. At times though (and I mean quite frequently), a compendium of figures are referred to. Whilst many are also explained to some degree, the audiobook format doesn't bode so well here. So if you really want to get deep into the book it's probably better to get a hard copy. Either that or don't be cycling through forests without some form of futuristic on-demand heads-up display whilst listening."
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Tim (4 out of 5 stars)