“Kill all the Quants”?: Models vs. Mania in the Current Financial Crisis

June 26, 2009

MIT Sloan Professor to deliver public lecture at SIAM Annual Meeting

"Blaming quantitative analysis is akin to blaming E=MC2 for nuclear meltdowns," says MIT Sloan School of Management's Andrew W. Lo, the 2009 I.E. Block Community Lecturer. Lo will deliver a talk entitled "Kill all the Quants"?: Models vs. Mania in the Current Financial Crisis during the annual meeting of the Society for Industrial and Applied Mathematics (SIAM). The Block Lecture will be held on Wednesday, July 8, at 6:15 p.m. in the Four Seasons Ballroom 4 at the Colorado Convention Center in Denver, Colorado. The lecture is free and open to the public and will be immediately followed by a Community Reception at 7:15 p.m. in the Four Seasons Foyer.

As shockwaves of the financial crisis of 2008 propagate throughout the global economy, the blame game has begun in earnest, with some fingers pointing to the complexity of certain financial securities and the mathematical models used to manage them. In his talk, Lo will review the evidence for and against this view, and argue that a broader perspective will show a much different picture.

Instead of blaming quantitative analysis he says, a more productive line of inquiry might be to look deeper into the underlying causes of financial crisis, which ultimately leads to the conclusion that bubbles, crashes, and market dislocation are unavoidable consequences of hardwired human behavior coupled with free enterprise and modern capitalism. However, even though crises cannot be legislated away, there are many ways to reduce their disruptive effects. Lo will conclude his talk with a set of proposals for regulatory reform.

Andrew W. Lo is the Harris & Harris Group Professor of Finance at the MIT Sloan School of Management and the director of MIT's Laboratory for Financial Engineering. He received his Ph.D. in economics from Harvard University in 1984, and taught at the University of Pennsylvania's Wharton School as the W.P. Carey Assistant Professor of Finance from 1984 to 1987, and as the W.P. Carey Associate Professor of Finance from 1987 to 1988.

Organized by SIAM, this free event encourages public appreciation of the excitement and vitality of applied mathematics by reaching out as broadly as possible to students, teachers, and members of the local community, as well as to researchers and practitioners in the fields of applied mathematics and computational science. The lecture is named in honor of I. Edward Block, founder of SIAM, who served as its Managing Director for nearly 20 years. For more information on the Block Lecture, visit www.siam.org/prizes/sponsored/block.php.

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