This book fills an outsized gap in accepted financial-market theory. The MIT-based author makes the case that markets evolve, like biology, discounting the physics-envy that permeates most modern-day investment theory. His approach is particularly useful in trying to understand the strategy shifts taking place in wealth management to non-traditional assets classes. The chapter on hedge funds, “The Galapagos Islands of Finance,” should be singled out for lifting the curtain on the industry segment. “A canny observer can see financial evolution happening before his very eyes in the hedge-fund industry, in a way that is impossible to see in other, slower moving sectors of the financial markets.” Lo defends his overall approach with rigid and accessible analysis, helping to ward off naysayers. Adaptive Markets is now a prominent addition to most Wall Street bookshelves. Let’s hope that practitioners actually read it. Finding it to be such a delightful and relevant journey, they will want to read it again.
