According to a new book by an MIT economist argues that the efficient market hypothesis is “incomplete and inadequate” when it comes to valuations, says an article appearing last month in Barron’s. In his book, titled Adaptive Market, Financial Evolution at the Speed of Thought, behavioral finance authority Andrew Lo argues that market forces other than investor buying and selling behavior (based on corporate earnings profits) — such as increased demand from retirement funds– can drive stock valuations over the long term. “Over the long run,” says Lo in a recent interview with MarketWatch, “markets are looking pretty good, because […]
Although U.S. stock valuations are stretched, economist and leading authority on behavior finance Andrew Lo says this can continue for years due to growing demand for equities by retirement funds,” says a recent article in MarketWatch. Lo is director of the MIT Laboratory for Financial Engineering who also helped establish the new Office of Financial Research under the U.S. Treasury Department. In a recent interview, he asserted, “Having a large number of passive investors buying and holding index funds for the next 20 years will cause the market’s value to continue to rise.” But the issue of whether the stock […]
Research shows that trading strategies built around tweets in the days preceding Fed meetings have been profitable, writes Steve Russolillo in this week’s The Wall Street Journal. As the use of quantitative investment strategies continues to rise, social-media platforms such as Twitter have become popular sources of intel to gauge investor sentiment, says Russolillo, referring to the frequency and impact of the president elect’s tweets since the election. A study conducted by Andrew Lo, a finance professor at MIT’s Sloan School of Management, and Ph.D. student Pablo Azar analyzed 3.9 million Fed-related tweets from 2007 through 2014 and assigned scores […]
MIT Finance Professor Andrew Lo says that getting out of the market during though times isn’t the biggest mistake investors make — it’s failing to get back in soon enough.
In an interview with WealthTrack’s Consuelo Mack, hedge fund manager, author, and M.I.T. professor Andrew Lo says that the financial crisis has shown that a new type of diversification is needed, that buy-and-hold investing is an incomplete approach, and that using a long-only approach puts individual investors at a significant disadvantage. Lo, who also heads M.I.T.’s laboratory for financial engineering, says buy-and-hold investing is “not necessarily wrong, but it’s incomplete.” Back in 1970s and 80s and 90s, the market had its ups and downs, but overall there was a level amount of risk and a reasonable risk premium, so returns […]