When Covid-19 hit, a lot of bullish investors looked for lessons in the previous outbreak. But the comparisons may be misleading.

Stock markets love to take everyone by surprise, and less than a year from now a very big surprise will have played out: Stocks will be a lot higher by June as the economy moves into overheat mode. How do we get from the current grim state of affairs to this very different world? Two steps.

As donations to nonprofits have decreased during the Covid-19 pandemic, those with endowments are turning to these funds to help them survive the crisis. But not all endowments are created equal. Factors such as size, management, and investment allocation significantly affect how much revenue endowments generate.

“The parallels between video games and day trading is becoming closer and closer,” says Andrew Lo, a finance professor at Massachusetts Institute of Technology. “For many gamers, particularly the younger ones who are not used to trading and don't fully understand the impact of significant losses and gains on their psychophysiology, it could have some significant adverse consequences.”

One thing we’ve learned from the Covid-19 crisis is that there can be a conflict between resilience and optimisation. If, for example, the NHS had had lots of spare beds, ventilators and PPE equipment before the pandemic began it would have been more resilient and better able to cope with the crisis. But this would at the time have appeared sub-optimal, as these resources would have been wasted for months.

In the past two months alone, Wall Street investors have pumped billions into a handful of biotech companies in the early stages of producing vaccines or drugs to combat the novel coronavirus. Some of these companies are pursuing promising treatments, experts say, but others are likely to strike out on finding a cure. The result: a coronavirus investment bubble that's already approaching nearly $200 billion in stock market value.

Yet, little is known about which NPOs have endowment funds and how they invest. A new paper by MIT Sloan School of Management Prof. Andrew W. Lo and Visiting Prof. Egor Matveyev sheds light on the “black box of endowments,” revealing that bigger funds and NPOs with stricter governance generate higher returns.

For Jim Simons, history is repeating itself, at least when it comes to meltdowns in the quant fund world. Computer models at Renaissance Technologies, the firm founded by the mathematician and former codebreaker, misfired when volatility surged this year, contributing to a first-quarter loss at its largest hedge fund. The beta models, which help determine portfolio exposure at funds for outside investors, “in recent volatile markets have not performed as expected,” Renaissance said in a March 30 filing.

As gene-based vaccines are being designed and tested at unprecedented speeds to fight COVID-19, scientists wonder if this will be the technology’s make-or-break moment.

This is an abridged version of an MIT Sloan School of Management lecture delivered online by Prof. Andrew W. Lo to students in his 15.481 class "Financial Market Dynamics and Human Behavior" on March 31, 2020.

Annual Reviews, MIT Golub Center for Finance and Policy (GCFP) and New York University Stern School of Business (NYU Stern) convened for a two-day conference, “2008 Financial Crisis: A Ten-Year Review,” spotlighting the perspectives of those with expert vantage points of the crisis. New review articles focused on the 2008 financial crisis in the Annual Review of Financial Economics Volume 10 were presented. The conference program covered topics including bailouts and their consequences, accounting issues that impact financial stability, trust and the future of finance, asset pricing, leverage and systemic risk.

At the height of the credit crunch in 2008, academics at the London School of Economics were infamously caught off guard when the Queen of England asked why no one saw the financial crisis coming. Now, 10 years after the collapse of Lehman Brothers Holdings Inc. on Sept. 15, 2008, economists, regulators, policymakers and finance industry insiders are asking themselves where the next financial crisis could come from, and what danger signals they should watch for, to avoid being blindsided again.

While there are several areas of potential concern, industry experts broadly do not believe a systemic collapse on the same scale of 2008 is on the horizon.

Was it just a communication failure? Or why were the Bush administration and the Obama administration set up the following year so insufficiently prepared to declare themselves a financial crisis in 2008 ?

The financial system has gotten much more complex, but many financial regulations are from the 1930's and 40's, notes Andrew Lo, professor at the MIT Sloan School of Management. Lo helped come up with the idea for the U.S. Office of Financial Regulation, which was created by the 2010 Dodd Frank Act. Nonetheless, much of Dodd Frank is way too long and difficult for anyone to understand, Lo contends. 'That wasn't so much an update as it was a piling on of new regulations,' Lo says of Dodd Frank.

The financial crisis was, among other things, a data failure. Now the Treasury’s Office of Financial Research is trying to use data to create an early warning system for risk.