The majority of Americans have an investment on the market, but economists aren't able to agree on whether market participants and investors are efficient and rational, according to modern financial theory or are irrational and inefficient according to behavioral economists, and as financial crashes, bubbles and crises indicate. This is among the most important discussions in economics, and the effectiveness or ineffectiveness of financial management and investment regulation is contingent on the outcomes. This course MIT Finance Professor Andrew W. Lo breaks down the debate by proposing a new model--the Adaptive Markets Hypothesis --in where irrationality and rationality are able to coexist. Based on evolutionary psychology, biology and neuroscience, artificial intelligence and many other disciplines This course demonstrates how the concept of efficiency in markets isn't a sham however it is merely insufficient. If markets are unstable investors respond instinctively and create inefficiencies for other investors to profit from. This new model describes how the evolution of market behavior and behaviour in a rapid pace of thought, a reality that is revealed through fluctuations between stability and crisis as well as profit and loss as well as the development of new regulations and innovation. A fascinating intellectual journey filled with compelling stories, the course begins with the origins of market efficiency and its failures, turns to the foundations of investor behavior, and concludes with some practical implications--including how hedge funds have become the Galapagos Islands of finance, what really happened in the 2008 meltdown, and how we might avoid future crises. This course offers innovative new strategies to tackle the most pressing issues that we face today, such as cancer and climate change, as well as the energy crisis and the best way to navigate the turbulent waters of the global financial market in a post-COVID-19 era.
