Statement of Purpose
The Research Foundation of CFA Institute is a
the development and dissemination of relevant
research for investment practitioners worldwide.
Andrew W. Lo is Harris & Harris Group Professor of Finance at the MIT Sloan School of Management
and director of MIT’s Laboratory for Financial Engineering. He is founder and chief scientific officer of
AlphaSimplex Group, LLC, a quantitative investment management company based in Cambridge, Massa-
chusetts. He previously taught at the University of Pennsylvania’s Wharton School as W.P. Carey Assistant
Professor of Finance and as W.P. Carey Associate Professor of Finance. He has published numerous articles
in finance and economics journals and is a co-author of The Econometrics of Financial Markets and A Non-
Random Walk Down Wall Street. His awards include the Alfred P. Sloan Foundation Fellowship, the Paul A.
Samuelson Award, the American Association for Individual Investors Award, the Financial Analysts Journal ’s
Graham and Dodd Award, the 2001 IAFE–SunGard Financial Engineer of the Year award, a Guggenheim
Fellowship, and awards for teaching excellence from both Wharton and MIT. He is a former governor of the
Boston Stock Exchange and currently serves as a research associate of the National Bureau of Economic
Research and as a member of the NASD’s Economic Advisory Board. He holds a PhD in economics from
Parts of this monograph include ideas and exposition from several previously published papers and books of
mine. Where appropriate, I have excerpted and, in some cases, modified the passages to suit the current context
and composition without detailed citations and quotation marks so as to preserve continuity. However, several
sections involve excerpts from co-authored articles, and I wish to acknowledge those sources explicitly:
“Attrition Rates” in Chapter 4 is excerpted from Getmansky, Lo, and Mei (2004); parts of Chapter 5 are
excerpted from Getmansky, Lo, and Makarov (2004); parts of Chapter 6 are excerpted from Lo, Petrov, and
Wierzbicki (2003); and parts of “Hedge Funds and the Efficient Market Hypothesis” in Chapter 8 are excerpted
from Lo (2004).