Using Evolutionary Biology to Predict Financial Success

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Traders on the New York Stock Exchange floor in 1963. MIT Prof. Andrew Lo said evolutionary biology can explain the investment decisions traders like these make every day.

The stock market may be tough to predict. Even marquee investment houses build wrong guesses into their business models. But here's what's not tough to predict: humans trading stocks and making investment decisions will make mistakes — sometimes with tragic consequences.

MIT's Andrew Lo argues evolutionary biology may be the key to understanding how humans react to financial choices, and how they may behave in the future. He joined Kara Miller to talk about his research.

GUEST:

• Andrew Lo, professor of finance and Director of the Laboratory for Financial Engineering at MIT's Sloan School.