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.”

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.

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.

Watch the MIT Industrial Liaison Program with professors Yossi Sheffi, Alex Pentland, and Andrew Lo for a special webinar highlighting the impacts of COVID-19 on business.

Topics include:
* What should firms be doing with their supply chain now?
* Who is most at risk in your organization? What should firms be doing to prevent catastrophic spread of the virus inside their organizations?
* What do executives need to be watching now in financial markets?

Andrew W. Lo's presentation slides available HERE

See overview and agenda on the MIT ILP website

Clark Kent was a mild-mannered reporter; Peter Parker, a lonely high school student. They were the perfect disguise for their alternate selves, Superman and Spider-Man, allowing them to evade attention when they weren’t saving the world.

So, who will save the financial services industry from Covid-19? Andrew Lo, the MIT finance professor, suggests another unlikely hero – quants. Their superpower, he argues, is the ability to act as a bridge between the world of science and the world of finance.

LAFAYETTE, Calif.--(BUSINESS WIRE)--The Journal Of Investment Management (JOIM) and New Frontier Advisors LLC today announced the winners of the 2019 Harry M. Markowitz Award. The winners are finalized by a Special Selection Panel comprised of Nobel Prize Laureates.

The Markowitz Award is sponsored jointly by JOIM and New Frontier Advisors and recognizes the seminal and transcendent impact of Dr. Markowitz’s work as a financial economist and mathematician on both theoretical finance and the practice of asset management. The award was established to honor his legacy and to support future research and innovation in practical asset management. Candidates for the annual award are chosen from among papers published in JOIM in a calendar year. An honorarium of $10,000 is bestowed for the winning paper. Two additional finalist papers receive a Special Distinction Award along with a $5,000 honorarium.

2019 Markowitz Award Winners

This year’s top recognition was awarded to “Funding Long Shots,” by John Hull, Professor of Derivatives and Risk Management at the University of Toronto’s Rotman School of Management, Andrew W. Lo, the Charles E. and Susan T. Harris Professor of Finance and the Director of the Laboratory for Financial Engineering at the MIT Sloan School of Management, and Roger M. Stein, Adjunct Professor at New York University’s Stern School of Business.

On August 5, 2016, Cathay Pacific Flight 905 from Hong Kong was heading for an on-time arrival at Manila’s Ninoy Aquino International Airport when something unexpected occurred. The pilots radioed air traffic controllers and said they had lost GPS (Global Positioning System) guidance for the final eight nautical miles to “runway right-24.” Surprised, the controllers told the pilots to land the wide-body Boeing 777-300 using just their own eyes. The crew members pulled it off, but they were anxious the whole way in. Fortunately, skies were mostly clear that day. The incident was not isolated. In July and August of that year, the International Civil Aviation Organization received more than 50 reports of GPS interference at the Manila airport alone.

More than 10 years since the global financial market meltdown, regulators and central bankers are confident that a stronger and well capitalized banking system is better able to withstand another major systemic shock. Yet proven measures of systemic risk, and particularly predictive tools that cut through market noise and volatility, remain hard to come by. Bank Holdings and Systemic Risk, a paper published last year on the Federal Reserve Board website, puts forward what its co-authors claim is a unique and effective statistical approach that can monitor for systemic risk in banking. It can also be utilized for tracking change and risk in other complex sectors such as mutual funds, real estate investment trusts (REITs) and broker-dealer holdings.

On the Thursday, January 24 edition of Bloomberg Baystate Business we spoke with Bloomberg Intelligence gaming and lodging analyst Brian Egger about MGM-Springfield, the latest on the Wynn saga, and sports betting. Rob Almeida of MFS stopped by to talk about the markets. Bloomberg News endowments reporter Michael McDonald joined us to talk about his story on Baupost Group’s Seth Klarman, who sees opportunity in the markets. Boston Business Journal real estate editor Catherine Carlock talked about the commercial real estate market in Boston. Finally, MIT’s Andrew Lo talked about technology, finance and investing. Hosts: Peter Barnes, Janet Wu and Pat Carroll. Producer: Dan Pierce.

People tend to fear the wrong things when it comes to indexing and exchange-traded funds. Take the recent hand-wringing over an Index Industry Association report that there are now 3.7 million market indexes, an increase of about a half a million from last year. The Twitter commentary was predictable, with observations such as “peak passive” and “smells like CDOs.

Sanford C. Bernstein — the firm that famously compared passive investing with Marxism in a research note and then proceeded to make two indexes and launch two ETFs tracking them — was so triggered by that number they wrote a satirical story mocking the quixotic quest for the perfect index.

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.

On June 17- 21, the Becker Friedman Institute at the University of Chicago (BFI) and the MIT Laboratory for Financial Engineering hosted the Macro Financial Modeling Summer Session for Young Scholars. For the third year, the camp brought together the next generation of economists and industry leaders to learn, discuss, collaborate, and find connections between macroeconomics and finance. Together, the “campers” explored the frontiers of this essential work, and provoked many stimulating discussions and new ideas.