Adaptive Markets: Financial Market Dynamics and Human Behavior

15.481x Adaptive Markets is an MIT Sloan course by finance professor Andrew Lo, available free in the Open Learning Library. It takes on the debate between the efficient markets view of modern finance and the behavioural view that investors and markets are irrational, and proposes a framework, the Adaptive Markets Hypothesis, in which rationality and irrationality coexist. Drawing on psychology, evolutionary biology, neuroscience and artificial intelligence, the course argues that market efficiency is incomplete rather than wrong: when markets are unstable investors react instinctively, creating inefficiencies others can exploit.

The eight units start with financial orthodoxy, then reject the random walk and efficient markets, cover behavioural biases and the neuroscience of decision-making, evolution and the origin of behaviour, the Adaptive Markets Hypothesis itself, hedge funds as the Galapagos Islands of finance, and applications including the 2008 meltdown, the COVID-19 period and challenges such as cancer and climate financing. MIT estimates 13 weeks; the catalogue lists 8 hours per week. The course is self-paced, you may browse anonymously or enrol free to track progress, and, as with everything in the Open Learning Library, there are no fees and no certificate.