RT18: Are markets really Efficient? ft. Andrew Lo & Sol Waksman – 1of2 - a podcast by Niels Kaastrup-Larsen

"I was going through one of those inevitable losing streaks [early in my career] and I had a fundamental question. Does anyone make money trading the futures markets, or is it all a casino set up for the benefit of the exchanges?" - Sol Waksman (Tweet)
Welcome to Top Traders Round Table, a podcast series on managed futures brought to you by CME Group. On today's episode, host Niels Kaastrup-Larsen speaks with Andrew Lo, the Charles E. and Susan T. Harris Professor at the MIT Sloan School of Management, and Sol Waksman, the Founder and President of BarclayHedge, Ltd. Our guests today have many years of experience in the world of investing and have watched the finance industry as it has gone through it's many changes. Listen in to learn the historical importance of separating the alpha from the beta, the increase of the volatility of volatility since 2007, and common misconceptions about diversification in a portfolio.

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In This Episode, You'll Learn:

How our guests got their starts in finance
Why Andrew thinks that sometimes things need to be believed to be seen
Why separating the alpha from the beta has been revolutionary for the entire financial industry

"Markets are efficient most of the time. Every once in a while, human behavior ultimately overwhelms the kind of rational deliberation that efficient markets are based on, and we do see periods of fear and greed that ultimately take over. But it's not one or the other, it's both." - Andrew Lo (Tweet)

How the narrative of finance and investing has changed over time in the futures industry
The increase in the volatility of volatility over the last decade and what that means for managed futures

"I think that for the most part, investors misrepresent what they want." - Sol Waksman (Tweet)

How the abundance of passive investing tools has changed the investor's experience during market changes
What investors are looking for in their tools and strategies
What alternative strategies are investors looking at now

"The one lesson we learn from academics throughout the whole process of passive investing is that diversification is really key." - Andrew Lo (Tweet)

The experiment Andrew does with his audiences he speaks to on their investment preferences
What investors need to understand about diversification and risk

This episode was sponsored by CME Group:

Connect with our guests:
Learn more about Andrew Lo and MIT Sloan School of Management
Learn more about Sol Waksman and BarclayHedge, Ltd.
"A stock index has no relevance to the performance of a CTA, but if you calculate alpha by regressing against the stock index, you have a number that is absolutely meaningless." - Sol Waksman (Tweet)
Full Transcript
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Niels
Welcome back to another edition of Top Traders Round Table, a podcast series on managed futures. My name is Niels Kaastrup-Larsen and I’m delighted to welcome you to today’s conversation with industry leaders and pioneers in managed futures brought to you by CME Group.
Today I am very thrilled to be joined by Andrew Lo who is a professor at the MIT Sloan School of Management and Director of MIT’s laboratory of financial engineering, as well as the founder, and since 2018, the Chairman Emeritus at AlphaSimplex Group, and of course, the most recent winner of the Managed Futures Pinnacle Awards. I’m also joined by another veteran of this industry, namely Sol Waksman who is the founder and President of Barclayhedge.
First of all, welcome, and thank you so much for taking time out of your busy schedule to join to me to explore some of the things that go o...

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