Economics & Finance

Adaptive Markets: Financial Evolution at the Speed of Thought

A new, evolutionary explanation of markets and investor behavior


$37.50 / £32.00
6 x 9.25 in.
13 color illus. 28 line illus. 9 tables.
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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 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.

A fascinating intellectual journey filled with compelling stories, Adaptive Markets starts with the origins of market efficiency and its failures, turns to the foundations of investor behavior, and concludes with practical implications—including how hedge funds have become the Galápagos Islands of finance, what really happened in the 2008 meltdown, and how we might avoid future crises.

An ambitious new answer to fundamental questions in economics, Adaptive Markets is essential reading for anyone who wants to know how markets really work.

Awards and Recognition

  • Winner of the 2018 PROSE Award for Excellence in Social Sciences, Association of American Publishers
  • Winner of the 2018 PROSE Award for Business, Finance & Management, Association of American Publishers
  • Finalist for the 2017 TIAA Paul A. Samuelson Award, TIAA Institute
  • One of the CNBC 13 Best Business Books of 2017
  • One of Foreign Affairs Best of Books 2017 – Economic, Social, and Environment / Finance
  • One of The New York Times Deal Book “Business Books Worth Reading” 2017 (chosen by Andrew Sorkin)
  • One of Exame’s “9 books that will help you get rich in 2018”
  • One of MoneyWeek’s “Five of the best books of 2017” (chosen by Dr. Matthew Partridge)
  • One of The Wall Street Journal’s What Business Leaders Read in 2017
  • One of the Microsoft Best Business Books of 2017
  • One of Financial Times ( Best Books of 2017: Economics
  • One of Bloomberg’s Best Books of 2017, chosen by Vitor Constancio
  • One of Bloomberg’s Best Books of 2017, chosen by Robert Shiller
  • Shortlisted for the 2017 Financial Times and McKinsey Business Book of the Year Award