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Article: SAME COIN, OPPOSITE SIDES: Prof says emotionless investing may be impossible; You're a behaviorialist, I'm a rationalist; and there may not be as much difference as we thought.(Andrew W. Lo)
- Article from:
- Pensions & Investments
- Article date:
- June 24, 2002
- Author:
CopyrightCOPYRIGHT 2002 Crain Communications, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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The views of behaviorists (that markets are driven by fear and greed) and rationalists (that fundamentals dictate the market) actually are opposite sides of the same coin, according to early research by Andrew W. Lo.
Basically, he says emotion is a part of rationality, and questions whether professional investors can do their jobs without emotion taking an important role.
Mr. Lo, who is the Harris & Harris Group Professor at MIT's Sloan School of Management and director of its Laboratory for Financial Engineering, is at the early stages of research that he hopes will establish a ``new paradigm'' for financial economics. Ultimately, if he is successful, ...