The research: As director of the Laboratory for Financial Engineering (a partnership between academia and industry) Lo has established a new way of looking at financial markets. Key to his approach is an interdisciplinary mindset. Lo integrates multiple ideas from a variety of disciplines into his research, analyzing financial challenges through a completely new lens.
One of Lo's landmark discoveries has been in the psychology of financial decision-making — in essence, how the physiology of risk-based decision-making affects financial markets. Analyzing the physiological and emotional characteristics that influence the financial decision-making process, Lo explores how these factors affect the outcome of trading.