Many of us like to think of financial economics as a science, but complex events like the financial crisis suggest that this conceit may be more wishful thinking than reality. Andrew Lo More Quotes by Andrew Lo More Quotes From Andrew Lo The United States has the most sophisticated financial markets in the world, which does not leave much room to maneuver. But it also offers investors the greatest access to information and the ability to execute trades quickly and efficiently. So it is a mixed bag of opportunity. Andrew Lo united-states doe opportunity Maybe we should teach schoolchildren probability theory and investment risk management. Andrew Lo probability-theory risk management Great investors need to have the right combination of intuition, business sense and investment talent. Andrew Lo intuition money needs Labor is getting more expensive and technology is getting cheaper. Andrew Lo cheaper technology labor The risks facing hedge funds are non-linear and more complex than those facing traditional asset classessuch risks are currently not widely appreciated or well-understood Andrew Lo linear risk appreciated Economists suffer from a deep psychological disorder that I call 'physics envy'. We wish that 99 percent of economic behavior could be captured by three simple laws of nature. In fact, economists have 99 laws that capture 3 percent of behavior. Economics is a uniquely human endeavor. Andrew Lo psychological-disorders simple law Financial crises are an unfortunate but necessary consequence of modern capitalism. Andrew Lo modern crisis financial While neurological studies have tried to identify components responsible for fear and greed, the impact on finance is less clear. Andrew Lo impact greed study My mother died of lung cancer last year. I felt helpless. As an economist, I thought, What can I do? Andrew Lo cancer mother years We didn't want to be part of a big bank or insurance company. We did not want to be overwhelmed and we wanted to be free of any conflicts, we wanted a relationship that allowed us to run the company and build the company from the start. Andrew Lo top-news I think it's a very good investment, our marketing strategy is that we will become the entertainment hub of the Danang and Hoi An area. Andrew Lo company-news After Occupy, (Hong Kong people) started to be nervous about the future. Andrew Lo world Most people are overconfident about their own abilities. That is probably a good thing. But we would be horrified if a physician's aide engaged in heart surgery. Andrew Lo own good heart people I don't entirely reject the idea of efficient markets. It needs updating. Andrew Lo markets idea efficient needs The adaptive markets hypothesis says that all economic institutions, like our own species, develop and change over time, depending on the population of investors that are engaged with them. Andrew Lo own like change time During periods of extreme fear or greed, you don't have the proper balance between those two to generate market efficiency and you get extremes in behavior. Andrew Lo you balance behavior fear If you rank the top 50 one-day moves in the S&P 500, a fair number of those happened within the last five or 10 years. That tells you that we're in a different, riskier market now. Andrew Lo top you different years What makes this story so remarkable is that throughout my early childhood I had ongoing learning difficulties, particularly in mathematics. I struggled to learn the multiplication table, and no matter how hard I tried, I simply couldn't remember 6 times 7 or 7 times 8. Andrew Lo childhood mathematics learning matter If we are able to allow people to earn a decent rate of return, with sufficient scale, we can all do well by doing good. Andrew Lo doing good doing-good people Some people might say, 'Can we afford it?' I think that's asking the wrong question... We should instead be asking, 'Can we really afford not to try?' Andrew Lo some-people try think people
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