Odd Lots Cliff Asness on How Markets Got Dumber in the Last 10 Years
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Nov 13, 2025 
Cliff Asness, co-founder and CIO of AQR Capital Management, discusses his belief that markets have become less rational over the last decade. He explores the impact of social media and retail trading on market dynamics, highlighting how they contribute to inefficiencies. Asness reflects on the evolution of quantitative investing, the challenges posed by passive investing, and how AI is integrated into their processes. He also touches on the dual explanations for market behavior, blending risk-based and behavioral perspectives.
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Two Faces Of Momentum
- Momentum can work from both feedback-chasing and fundamental underreaction reasons.
- Price moves often underreact to news, leaving some predictable continuation for traders.
AQR's Harrowing Early Ride
- AQR launched in 1998 and first prospered in the Russian crisis month before suffering during the dot-com bubble.
- The firm survived extreme value spread swings and later recovered with a full round-trip of returns.
Valuation Spread Extremes Signal Dislocation
- Classic valuation spreads are measurable and show long-run patterns that reveal extreme dislocations.
- Recent decades produced spread extremes exceeding 50-year norms, indicating larger episodic inefficiencies.
