Financial Analysts Journal 1 July 2021 Volume 77 Issue 3
The Financial System Red in Tooth and Claw: 75 Years of Co-Evolving Markets and Technology
A 75 year review of financial practice through the lens of the Adaptive Markets Hypothesis, examines a complex ecosystem where technological innovation interacts with shifting business conditions and a growing population of financial stakeholders.
The 75th anniversary of the founding of the Financial Analysts Journal offers a rare vista of the evolutionary path of financial analysis and its practitioners. That path is by no means random but is shaped by a complex ecosystem in which technological innovation interacts with shifting business conditions and a growing population of financial stakeholders. Using the lens of the Adaptive Markets Hypothesis—the principles of evolutionary biology and ecology applied to the financial system—we can clearly identify eight discrete financial “eras” in which unique combinations of economic need and technological advances gave rise to new products, services, and financial institutions. By understanding the underlying drivers and resulting dynamics of these eras, we can begin to develop a deeper appreciation for the origins of financial innovation and its great promise for our future.
About the Author
Andrew W. Lo is the Charles E. and Susan T. Harris Professor, a professor of finance, and the director of the Laboratory for Financial Engineering at the MIT Sloan School of Management. He is also a principal investigator at the MIT Computer Science and Artificial Intelligence Laboratory, an affiliated faculty member of the MIT Department of Electrical Engineering and Computer Science, an external faculty member of the Santa Fe Institute, and a research associate of the National Bureau of Economic Research. Professor Lo is a member of the Federal Reserve Bank of New York’s Financial Advisory Roundtable, FINRA’s Economic Advisory Committee, the National Academy of Sciences Board on Mathematical Sciences and Their Applications, Beth Israel Deaconess Medical Center’s Board of Overseers, and the boards of Roivant Sciences and the Whitehead Institute for Biomedical Research. He earned a BA in economics from Yale University and an AM and a PhD in economics from Harvard University.