Adaptive Markets and the New World Order
Name
Lo_Adaptive Markets.pdf
Size
434.57 KB
Format
Adobe PDF
Checksum (MD5)
235d5267e2a1783315ad7fbfb3a78918
Author(s)
Lo, Andrew W.
Date Issued
May 2012
Journal
Financial Analysts Journal
Publisher
CFA Institute
Citation
Lo, Andrew W. “Adaptive Markets and the New World Order (corrected May 2012).” Financial Analysts Journal 68.2 (2012): 18–29.
Version
Author's final manuscript
Abstract
In the adaptive markets hypothesis (AMH) intelligent but fallible investors learn from and adapt to changing economic environments. This implies that markets are not always efficient but are usually competitive and adaptive, varying in their degree of efficiency as the environment and investor population change over time. The AMH has several implications, including the possibility of negative risk premiums, alpha converging to beta, and the importance of macro factors and risk budgeting in asset allocation policies.
MIT Department
Sloan School of Management
Terms of Use
Creative Commons Attribution-Noncommercial-Share Alike 3.0
Persistent DSpace Link
DOI of Published Version
https://doi.org/10.2469/faj.v68.n2.6
