October 26, 2018 | Cambridge, MA

While it is the case that markets behave well most of the time, periods of booms, busts, and financial crises highlight the fact that they are not infallible and can breakdown from time to time, often for understandable and predictable reasons. However, traditional models of financial markets—which rely on a series of simplifying economic assumptions, e.g., that investors have rational expectations and that markets are efficient—fail to capture these dynamics.

To address these shortcomings, a new literature has emerged that eschews traditional economic assumptions and examines investor behavior and financial market dynamics through the lens of evolution. In viewing global financial markets as a complex biological system, researchers in this area are working to develop more effective models for managing investments with the goal of allocating resources more efficiently, enabling economic growth while maintaining financial stability.

The MIT Laboratory for Financial Engineering (LFE), in collaboration with the Santa Fe Institute, will host a conference focused on these topics on October 26, 2018 at the Norton’s Woods Conference Center at the American Academy of Arts and Sciences in Cambridge, MA. This invitation-only conference is intended to provide an opportunity to share new research and explore its applications and future directions among academic researchers, regulators, and industry practitioners.

We make a distinction between applications of biological evolution to understand financial behavior and evolutionary ideas applied to financial contexts. Both areas of research are equally important and intertwined and will be featured as part of this conference.