Adaptive Market Hypothesis

The efficient market hypothesis claimed that, over time, investors couldn't beat the market...that it was smarter than investors. And yes, Warren Buffett chuckles at this notion, because he slaughtered it for half a century. He is wealthy, and Andrew Lo, the MIT professor who posited this theory in 2004, is not. But just to humor the position, the adaptive market hypothesis is cattle rope, trying to bring the efficient market theory together with various models of irrational behavior in the stock market. It's kind of a Darwinian approach to the way in which the stock market works, relying largely on psychology striating the food chain for who does what to whom, in a kind of unholy wrestling match between greed and fear, where fraudulent behavior is the referee.