Alex Edmans - The Madness of Markets

In this episode of Standard Deviations, Dr. Daniel Crosby talks with Alex Edmans about his book The Madness of Markets. They discuss why active managers still struggle to beat markets if markets are as irrational as behavioral finance suggests, and how emotions shape the way investors read market-moving stories like weather and sporting events. Edmans breaks biased reactions into overreaction, underreaction and misreaction, and the conversation covers AI, employee satisfaction data, and whether some behaviors that look like discipline are actually bias.

1. The conversation asks why active managers still struggle to beat markets if markets are as mad as the guests suggest.
2. Edmans separates behaviorally biased reactions to markets into overreaction, underreaction and misreaction.
3. The episode questions whether stories about weather and sporting events moving markets carry signal for ordinary investors or are a broader point about emotion.
4. Edmans discusses AI and where he sees it on the spectrum between true revolution and mania, and whether some disciplined-looking behavior is really bias.