There are two popular schools of thought with regards to how markets work. There's the efficient markets hypothesis (EMH) which says that it's basically impossible to beat the market, because all information is completely priced in at all times (more or less). On the other side is an increasingly popular behavioral view which argues that various human emotions and biases are always creating situations that aren't justified by the data. On this week's episode of the Odd Lots podcast, we speak to Andrew Lo, a professor of finance at the MIT Sloan School of Management about his own theory, which he calls Adaptive Markets. The theory attempts to bridge the behavioral approach with the efficient markets view. He argues that the proper way to view the market is through an ecological lens, examining the players as flora and fauna of a complicated system, to help determine who's thriving, who's dying, and where asset prices will go.

There are two popular schools of thought with regards to how markets work. There's the efficient markets hypothesis (EMH) which says that it's basically impossible to beat the market, because all information is completely priced in at all times (more or less). On the other side is an increasingly popular behavioral view which argues that various human emotions and biases are always creating situations that aren't justified by the data. On this week's episode of the Odd Lots podcast, we speak to Andrew Lo, a professor of finance at the MIT Sloan School of Management about his own theory, which he calls Adaptive Markets. The theory attempts to bridge the behavioral approach with the efficient markets view. He argues that the proper way to view the market is through an ecological lens, examining the players as flora and fauna of a complicated system, to help determine who's thriving, who's dying, and where asset prices will go.

Bloomberg's Joe Weisenthal and Tracy Alloway explore the most interesting topics in finance, markets and economics. Join the conversation every Monday and Thursday.

Bloomberg's Joe Weisenthal and Tracy Alloway explore the most interesting topics in finance, markets and economics. Join the conversation every Monday and Thursday.

Bloomberg's Joe Weisenthal and Tracy Alloway analyze the weird patterns, the complex issues and the newest market crazes. Join the conversation every Tuesday and Thursday for interviews with the most interesting minds in finance, economics and markets.

Odd Lots

On Bloomberg’s Odd Lots podcast Joe Weisenthal and Tracy Alloway explore the most interesting topics in finance, markets, and economics. Join the conversation every Monday and Thursday. 

On Bloomberg’s Odd Lots podcast Joe Weisenthal and Tracy Alloway explore the most interesting topics in finance, markets, and economics. Join the conversation every Monday and Thursday.

An MIT Professor Explains His Original Theory For How Markets Really Work

https://api.omny.fm/orgs/e73c998e-6e60-432f-8610-ae210140c5b1/clips/07a61421-8c12-4a26-9a1d-ae27005b3019/transcript

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