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More From and about Andrew Lo

Sunday and again yesterday I wrote posts here about the biomedical world.
Yesterday's, you may recall, I summarized a paper by Andrew Lo and two other scholars, proposing a new system for the private financing of biomedical research.

Today I'd like to say something about another recent paper by Lo [well, not so recent -- I'm behind the curve -- this goes back to 2011], that is the other sign of the coin of Lo's own versatility. The paper offers a neuroscientific look at the impulses of traders and investors.

In both cases, the paper I summarized yesterday and this one, Lo occupies the borderland between biology and finance. But he faces in opposite directions: in the one case discussing the best ways to finance biology, in the other case discussing the biological bases of finance.

Now: isn't that a neat symmetry?

So who is Lo? He's the possessor of a Ph.D. in economics from Harvard University (1984). He has been on the MIT finance faculty since 1988, and taught at the University of Pennsylvania's Wharton School from 1984 to 1988.

His central claim to fame us the "adaptive market hypothesis," which exists on the border of biology and finance in yet a third sense. It is a modification of the efficient capital markets hypothesis according to evolutionary principles.

Let's get back to the neurosciences paper. I'll close with one provocative quote from there.

The work of Kapp, LeDoux, and many others showed that the pathway for fear response in the brain sidesteps the higher brain functions, including the ones we usually associate with rationality. This pathway leads instead to a specific center that processes the emotional significance of stimuli. We fear things for reasons outside out conscious, rational mind, and we do this because we have no choice, we are physiologically hard-wire to do so. More broadly, we behave, think, reach conclusions, and make decisions with the effects of the emotional brain always running in the background.


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