Book Description
Winner of the prestigious Paul A. Samuelson Award for scholarly writing on lifelong financial security, John Cochrane's Asset Pricing now appears in a revised edition that unifies and brings the science of asset pricing up to date for advanced students and professionals. Cochrane traces the pricing of all assets back to a single idea--price equals expected discounted payoff--that captures the macro-economic risks underlying each security's value. By using a single, stochastic discount factor rather than a separate set of tricks for each asset class, Cochrane builds a unified account of modern asset pricing. He presents applications to stocks, bonds, and options. Each model--consumption based, CAPM, multifactor, term structure, and option pricing--is derived as a different specification of the discounted factor.
The discount factor framework also leads to a state-space geometry for mean-variance frontiers and asset pricing models. It puts payoffs in different states of nature on the axes rather than mean and variance of return, leading to a new and conveniently linear geometrical representation of asset pricing ideas.
Cochrane approaches empirical work with the Generalized Method of Moments, which studies sample average prices and discounted payoffs to determine whether price does equal expected discounted payoff. He translates between the discount factor, GMM, and state-space language and the beta, mean-variance, and regression language common in empirical work and earlier theory.
The book also includes a review of recent empirical work on return predictability, value and other puzzles in the cross section, and equity premium puzzles and their resolution. Written to be a summary for academics and professionals as well as a textbook, this book condenses and advances recent scholarship in financial economics.
Customer Reviews:
I wanted to love this book.......2007-07-10
It's probably true that the first book you study about a subject inevitably determines your approach to it afterwards. My first book on asset pricing was Duffie's Dynamic Asset Pricing Theory (2nd ed), and it has perhaps forever biased my judgment. Given this caveat, I wanted to like this book. For econometricians, the stochastic discount approach is increasingly important, and Cochrane's articles are engaging and well written. But, no matter what the blurbs on the back cover of the book say, or what some Amazon reviewers claim, this is a flawed book. It's true that "the hurdles of asset pricing are really conceptual rather than mathematical" (last sentence in the book preface), but this is no excuse for being sloppy, and sloppiness in this book abounds. Assumptions are not clear; theorems are imprecisely stated. Continuous-time formulations pop up without explanation of the variables or of the motivation behind them. Expected-utility derivations are the main tool used by the author, but the connection between no-arbitrage, utility maximization and equilibrium are not clear, and one is led to think that the stochastic discount is unique to this line of reasoning. On the positive side, there are many interesting results and many intuitive explanations. My recommendation: i) read Duffie or Pliska first; ii) take the plunge and download Hansen & Richard's 1987 Econometrica paper (very dense); iii) read Cochrane, but reobtain all the results independently from what you have learned in in i) and ii).
The best.......2007-05-13
Upon recommendation by a friend of the author, I ordered this book through amazon. I read the entire book from cover to cover in a month. I am onto my second pass through the book.
Cochrane organizes pricing theories from CAPM to APT to derivative pricing, all of which I have learned through disparate sources, around a central theme: consumption based pricing theory. Then he goes on explaining the equivalence among these pricing theories, and indicate situations where these theories may best be used.
The author balances the theory with equal emphasis on empirical studies, from estimation methods to common pricing models, especially the Fama-French model. He also shares with us intuitive discussions of value factors, forecasting power of dividend/price ratios and the puzzling momentum factors.
What is especailly good about this book, I found, at least for myself, is how the author manages a casual style without losing rigor and focus. The author in 500+ pages review as well as explore vast amount of financial literature and present it to us in a clear and unified fashion. Another aspect I particularly like is that the author probably has students or people without finance ph.d.s in mind when he explains common but potentially confusing terminologies used in different segments of academic research.
Cochrane sketches out proofs for most of theorems and corollaries. Perhaps it is not the purpose of this book, and should not be required of it as such, that detail proofs be provided. Those can be found in references listed at the end of the book.
Overall I highly recommend this book to people who are interested in asset pricing theories as well as practice. Minimal advanced mathematics is sufficient, such as calculus and linear algebra.
Amazingly intuitive approach to write a text book.......2007-02-11
I agree with most reviewers who rate this book highly. In my opinion, the most outstanding quality of this book is the author's ability to make abstract materials very simple and intuitive without sacrificing the essential ideas of the subjects. The book is a perfect example of a good text book which is not intended to be written as a reference, although it easily has all the merits of being a good reference. (That said, to understand this book, readers need to have good mathematics and economics background to enjoy it.) I wish other books meant to be textbooks had this rare quality.
Very good.......2007-01-19
I took a Finance Ph.D. - level Asset Pricing course that used this book along with other sources and I'm quite happy with it. In particular, I enjoyed Ch 21 "Equity Premium puzzle and Consumption-Based Models". Some Matlab code for Campbell-Cochrane model is still available on my website (click on my name above).
My Favorite Asset Pricing Book.......2007-01-18
I have read most PhD-level textbooks on finance and Cochrane's is my favorite. Cochrane gives you the intuition using graphs as well as mathematical proofs for most of the results. The book is oriented toward training financial economists rather than financial mathematicians. If you are a financial economist and need to buy ONE book on asset pricing theory, buy Cochrane (the REVISED edition). If you are a financial mathematician and need to buy ONE book on asset pricing theory, buy Duffie. If you are smarter than the two guys I am talking about who want to buy ONE book only, then buy both! They are both helpful.
Book Description
Principles of Finance with Excel is the first textbook that comprehensively integrates Excel into the teaching and practice of finance. This book provides exceptional resources to the instructor and student, combining classroom-tested pedagogy with the full potential of Excel's powerful functions. In today's business world, computation is done almost wholly in Excel. Excel's ability to combine graphics with computation and perform complex sensitivity analysis with ease provides potent insights into financial problems. Despite this, most finance texts rely heavily on hand-held calculators and ignore Excel. As a result, many students find that after they enter the professional environment, they have to relearn both finance and Excel. Principles of Finance with Excel is ideal for undergraduate courses in introductory finance or as a reference for finance professionals. A Free In-Text CD for students contains electronic versions of all spreadsheets in the book. A Companion Website -- http://www.oup.com/us/benninga -- contains lecture notes, PowerPoint Slides, and a Test Bank for instructors.
Customer Reviews:
Everyone should have one.......2007-07-19
I think that every businessman or student of business, finance should get it, I bought this one and the book of financial modeling both here in amazon, this is something highly recomendly
Stellar.......2007-07-05
This order and all orders that I process through Amazon/Borders online always come in a timely manner. I have spent over $500 within the last three months and I am 100% satisfied with the service and quality of books that I receive.
Thanks,
J.D.
Good material, but full of errors........2007-05-28
This book is clear, concise, easy to follow, and solidly covers the fundamentals of finance. The excel portions are equally impressive, and the practical applications are clear. However, the examples and especially the solutions on the enclosed CD are riddled with mistakes and transcription errors. Frankly, I get the impression that the examples on the CD were put together by on of Benninga's less than stellar students. Three or four mistakes per exercise problem is what I found to be typical. Most of the errors are rather obvious, like saying months when they mean years, the examples in the book having different values than the corresponding problem on the CD, etc., but many of the problems are incorrectly solved as well. In at least one instance, they show the solution to an earlier problem instead of the problem they are supposed to be solving. There is also occasional bad grammer: "Note that the inflation series is not a trivial to put together"
All in all, the text isn't bad, and I've learned a lot from working through it. I just wish more time had been spent checking his work.
Nice book.......2007-05-15
It is a very useful book.I advise every financial practitioner to own this book and keep it as a refrence.
Great book..........2007-05-13
It is the best finance book that I ever put my hands on. Easy to understand if you are a beginner in the field; great to consolidate your knowledge and learn essential tips, if you are knowlegeable in finance.
Book Description
"This new edition of Active Portfolio Management continues the standard of excellence established in the first edition, with new and clear insights to help investment professionals."
-William E. Jacques, Partner and Chief Investment Officer, Martingale Asset Management.
"Active Portfolio Management offers investors an opportunity to better understand the balance between manager skill and portfolio risk. Both fundamental and quantitative investment managers will benefit from studying this updated edition by Grinold and Kahn."
-Scott Stewart, Portfolio Manager, Fidelity Select Equity ® Discipline
Co-Manager, Fidelity Freedom ® Funds.
"This Second edition will not remain on the shelf, but will be continually referenced by both novice and expert. There is a substantial expansion in both depth and breadth on the original. It clearly and concisely explains all aspects of the foundations and the latest thinking in active portfolio management."
-Eric N. Remole, Managing Director, Head of Global Structured Equity, Credit Suisse Asset Management.
Mathematically rigorous and meticulously organized, Active Portfolio Management broke new ground when it first became available to investment managers in 1994. By outlining an innovative process to uncover raw signals of asset returns, develop them into refined forecasts, then use those forecasts to construct portfolios of exceptional return and minimal risk, i.e., portfolios that consistently beat the market, this hallmark book helped thousands of investment managers. Active Portfolio Management, Second Edition, now sets the bar even higher. Like its predecessor, this volume details how to apply economics, econometrics, and operations research to solving practical investment problems, and uncovering superior profit opportunities. It outlines an active management framework that begins with a benchmark portfolio, then defines exceptional returns as they relate to that benchmark. Beyond the comprehensive treatment of the active management process covered previously, this new edition expands to cover asset allocation, long/short investing, information horizons, and other topics relevant today. It revisits a number of discussions from the first edition, shedding new light on some of today's most pressing issues, including risk, dispersion, market impact, and performance analysis, while providing empirical evidence where appropriate. The result is an updated, comprehensive set of strategic concepts and rules of thumb for guiding the process of-and increasing the profits from-active investment management.
Customer Reviews:
One to add to your reading list.......2007-06-30
I know many have this book and have never read it. Others read this book but never really understand it. However, if you can read it and understand it, it can offer a powerful tool for how to allocate capital. It actually is the basis for most indexing and quantitative methodologies. When applied to fundemental approaches to investment it can be quite powerful.
Sadly, though not enough money managers embrace what this book is trying to say with regards to risk and return.
Practical approach and mathematically rigorous at the same time.......2006-02-01
Excellent book for whom is looking for a practical approach that at the same time is presented through a rigorous mathematical methodology. The book is absolutely superior over the academic textbooks that usually limit themselves to CAPM and efficient market theory. Grinold and Kahn go much forward and at the same time had managed to clearly and meticulously show the CAPM model, its limitations and the more sophisticated tools developed from it. Beside of showing the active way of managing a portfolio, the serious mathematical presentations through which the different theories such as CAPM are described are very convincing of how difficult it could be to beat the market.
Theoretical framework with no practical examples........2005-01-20
There is important information in this book but most of us need to see numerical examples to reinforce theoretical concepts. This book really comes up short in this area. It provides some discussion with the formulas/equations it presents but is very incomplete in terms of worked out examples. Yes, including worked out examples might might mean a book three times as long, but the book would then be many, many times more useful to practitioners.
As it currently stands the book can only benefit the super-genius-theoretical types who do not need to see examples to understand OR someone who ALREADY really understands the concepts.
The book rather frequently presents variables or constants without explicitly defining them for the reader (it assumes we know what they mean from the accompanying discussion).
The book gives exercises, but without answers what good are these?
The one thing the book does is make you realize there is a lot you do not know. You can find ideas in portfolio management that exist by reading this book but if you are at all like me you are going to have to look elsewhere for the answers. I have had better luck with Google searches for stuff like Style Analysis.
The book shows how smart the authors are: they know stuff that must of us do not. Unfortunately this is the feeling I get as I read sections of their book. They intend to keep it this way. Bottom line: the book fails to bridge the gap between theory and practice.
This is the seminal text for Quantitative Finance.......2004-11-11
If you work for one of the top alpha quant shops (Barclays, Goldman, etc.), this text is a the proverbial must read. These are the guys that essentially invented quantitative finance in its modern form, building upon the [only somewhat applicable] concepts of Sharpe and Rosenberg and demonstrating how they can be harnassed to drive alpha. Anybody who has given this text a poor review obviously doesn't work in quantitative finance (chances are they're merely stock-pickers). If you want to understand how to drive alpha and beat the market, this text goes a lot further than explaining the simple concepts of information ratio and tracking error; instead, this book touches on the beauty of multi-factor models and covariance risk management.
Very boring and dry.......2004-10-05
This book is a funny phenomenon in itself: it seems that every portfolio manager keeps a copy on her desk, but nobody I've talked to likes the book, or has even really read it. I read it and had to struggle hard to go from one page to the next. It's one of the WORST books I've ever read in any field. The book attempts to give the reader a comprehensive overview of the portfolio management discipline. Unfortunately, it's extremely dry, to the point of boring the reader to death. A lot of pages are also wasted on topics of dubious value, while important subjects like global management is treated lightly. I highly recommend against this book. It's a waste of money.
Book Description
"Aswath Damodaran is simply the best valuation teacher around. If you are interested in the theory or practice of valuation, you should have Damodaran on Valuation on your bookshelf. You can bet that I do."
-- Michael J. Mauboussin, Chief Investment Strategist, Legg Mason Capital Management and author of More Than You Know: Finding Financial Wisdom in Unconventional Places
In order to be a successful CEO, corporate strategist, or analyst, understanding the valuation process is a necessity. The second edition of
Damodaran on Valuation stands out as the most reliable book for answering many of todays critical valuation questions. Completely revised and updated, this edition is the ideal book on valuation for CEOs and corporate strategists. You'll gain an understanding of the vitality of todays valuation models and develop the acumen needed for the most complex and subtle valuation scenarios you will face.
Customer Reviews:
Very good and very useful book.......2007-09-03
Very useful book for every Investment analyst.
Special credits to Amazon for their perfect shipping - 10 days from order to delivery in BG with standard shipping option!!!
The best valuation book there is.......2007-05-19
This book is for individuals that are serious about valuation. Professor Damodaran provides a clear framework regarding key issues that need to be addressed during company valuation.
This is a must read.
Book Description
Stochastic Calculus for Finance evolved from the first ten years of the Carnegie Mellon Professional Master's program in Computational Finance. The content of this book has been used successfully with students whose mathematics background consists of calculus and calculus-based probability. The text gives both precise statements of results, plausibility arguments, and even some proofs, but more importantly intuitive explanations developed and refine through classroom experience with this material are provided. The book includes a self-contained treatment of the probability theory needed for stochastic calculus, including Brownian motion and its properties. Advanced topics include foreign exchange models, forward measures, and jump-diffusion processes.
This book is being published in two volumes. The first volume presents the binomial asset-pricing model primarily as a vehicle for introducing in the simple setting the concepts needed for the continuous-time theory in the second volume.
Chapter summaries and detailed illustrations are included. Classroom tested exercises conclude every chapter. Some of these extend the theory and others are drawn from practical problems in quantitative finance.
Advanced undergraduates and Masters level students in mathematical finance and financial engineering will find this book useful.
Steven E. Shreve is Co-Founder of the Carnegie Mellon MS Program in Computational Finance and winner of the Carnegie Mellon Doherty Prize for sustained contributions to education.
Customer Reviews:
Good book.......2007-10-01
I agree that most concepts are clearly explained....emphasis on *most*. OK, I'll nitpick. And I admit I'm nitpicking. For example, the proof of Jensen's inequality (which he oddly dives into without defining convex functions), is rather non-intuitive, and seems to be more an appeal to the accompanying picture rather than a proof. The proof given under the Wikipedia entry for "Jensen's Inequality" is much clearer, and makes much more sense, at least to my way of thinking. Other than the occassional gaffe such as this, it is a highly readable, informative, and dare I say enjoyable text!
Nice book.......2007-03-08
I think its a very good book for fundamental concepts in stocastic calculus.
Good for finanical mathematics graduates.......2007-01-10
clear explanations on binomial models for European and American options. Abstract concepts also included such as change of measures, martingales, stopping times. Proofs in book assumed no knowledge on sigma fields or measure theory.
Very good to understand the basics of pricing-theory........2006-03-04
This book is great book about theory. Using a simple binomial tree as asset evolution model, all key notions are introduced. Neutral-risk probabilities come up in a simple, natural way, and I never found such a clear explanation of the the change of measure and its meaning in finances. Examples help to understand every ussue.
The only case in which you should not buy it: if you are looking for real-market instruments and techniques.
Interesting Read.......2006-02-17
I found this book to be a very interesting and fun read. A very helpful introduction to binomimal models and basic stopping time principals. It also provides a great refresher to Martingale principals. If you are having trouble with Shreve's volume II then have a look at this book first.
Book Description
In Investors and Markets, Nobel Prize-winning financial economist William Sharpe shows that investment professionals cannot make good portfolio choices unless they understand the determinants of asset prices. But until now asset-price analysis has largely been inaccessible to everyone except PhDs in financial economics. In this book, Sharpe changes that by setting out his state-of-the-art approach to asset pricing in a nonmathematical form that will be comprehensible to a broad range of investment professionals, including investment advisors, money managers, and financial analysts. Bridging the gap between the best financial theory and investment practice, Investors and Markets will help investment professionals make better portfolio choices by being smarter about asset prices.
Based on Sharpe's Princeton Lectures in Finance, Investors and Markets presents a method of analyzing asset prices that accounts for the real behavior of investors. Sharpe makes this technique accessible through a new, one-of-a-kind computer program (available for free on his Web site, at http://www.stanford.edu/~wfsharpe/apsim/index.html) that enables users to create virtual markets, setting the starting conditions and then allowing trading until equilibrium is reached and trading stops. Program users can then analyze the final portfolios and asset prices, see expected returns, and measure risk.
In addition to popularizing the most sophisticated form of asset-price analysis, Investors and Markets summarizes much of Sharpe's most important previous work and reflects a lifetime of thinking about investing by one of the leading minds in financial economics. Any serious investment professional will benefit from Sharpe's unique insights.
Customer Reviews:
good new book for good price.......2007-09-06
good new book for good price. of all the books on the subject, this is by far the easiest to read.
Important read for professional investors.......2007-08-23
An important, relatively recent book by William Sharpe, a Nobel Prize winning economist and Stanford business prof. Not for the rank-and-file investor; but much useful information for pros and teachers of finance. Last chapter contains a summary of very useful advice suitable for anyone who invests in stocks.
"Normative Issues in a Positive Context".......2006-12-05
William Sharpe, who really needs no introduction, has made major contributions to some of the most influential discoveries in financial economics. From his parsimonious diagonal model which simplified the use of Markowitz' normative (prescribing how investors should behave) mean/variance approach to portfolio choice to the positive (describing how investors actually behave) Capital Asset Pricing Model, Professor Sharpe clearly approaches -- even from his earliest investigations - financial economics from a pragmatic perspective. Of course that work contributed to his selection in 1990 as a co-recipient (along with Harry Markowitz and Merton Miller) of The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.
In addition to his academic pursuits, Professor Sharpe has also been commercially successful, as a RAND economist, and as President, Chairman and/or Director of several enterprises related to investments. Of course, practitioners may know him best for his famous "reward-to-variability" ratio which we all know as the Sharpe ratio. Professor Sharpe has also made important fundamental contributions to options valuation, asset allocation implementation, and returns-based style analysis.
His pioneering books are standard text assignments for both undergraduate and graduate students of finance; these include Portfolio Theory and Capital Markets (McGraw-Hill, 1970 and 2000), Asset Allocation Tools (Scientific Press, 1987), Fundamentals of Investments (with Gordon J. Alexander and Jeffrey Bailey, Prentice-Hall, 2000), Investments (with Gordon J. Alexander and Jeffrey Bailey, Prentice-Hall, 1999). Now we are fortunate as an industry to have Professor Sharpe's latest book, Investors and Markets: Portfolio Choices, Asset Prices and Investment Advice (Princeton University Press, 2007), available.
Investors and Markets is the culmination of a series of three lectures Professor Sharpe gave at Princeton University in May, 2004. The lectures, titled "Asset Prices and Portfolio Choice" are designed to help individual investors make good saving and investment decisions, and Professor Sharpe is the first author I have seen to treat both asset pricing and portfolio choice as a single subject in an attempt to do so. The book is also a nice departure from the well-worn mean/variance framework (which places restrictions on beliefs), relying instead on the state/preference approach (which places restrictions instead on tastes) originally developed by Kenneth Arrow and Gerard Debreu. Although it relies on a discrete-time formulation, one advantage of the state/space framework is that it accommodates both consumption preferences and production outputs. Because there are (literally) an infinite number of future states of the world, closed-form derivations are nearly impossible and simulation is required in this context if we are to achieve equilibrium. To do so, Professor Sharpe built a simulation program called APSIM (Asset Pricing and Portfolio Choice Simulator), which was not available a couple of years ago when the lectures happened but since then he has made freely available on his website, [...].
Professor Sharpe's original Princeton Lectures are organized into 1) Equilibrium, in a single-period setting with homogeneity of investor expectations, 2) Diversity, in a setting where investors have heterogeneous expectations, and 3) Protection, a world in which investors have access to spanning instruments such as principal-protected notes. This is also largely the sequence of the book, which is organized into discussions of equilibrium, preferences and prices in chapters 1-4, which basically comprise Lecture 1; positions (reflecting preferences), and predictions (reflecting disagreement among investors) in chapters five and six, material primarily from Lecture 2, and protection and advice in chapters seven and eight, which is composed mainly of material from Lectures 2 and 3. The book concludes with four simple recommendations for personal investment: diversify as broadly as possible; economize on unnecessary costs; incorporate the circumstances and preferences of the individual client in the portfolio decision; and contextualize portfolio choice vis-à-vis asset pricing, keeping in mind the distinction between investing versus betting, desire for principal protection, and the potential trading impact of the investor when he or she eventually requires liquidity.
In Investors and Markets, Professor Sharpe is "primarily concerned with helping individual investors make good saving and investment decisions - usually with the assistance of professionals such as financial planners, mutual fund managers, advisory services, and personal asset managers." Although this book may prove tough going for the layperson, all professionals in the asset management industry would do well by their clients to buy, read and re-read it ... the clients will certainly benefit.
Book Description
This is a thoroughly updated edition of Dynamic Asset Pricing Theory, the standard text for doctoral students and researchers on the theory of asset pricing and portfolio selection in multiperiod settings under uncertainty. The asset pricing results are based on the three increasingly restrictive assumptions: absence of arbitrage, single-agent optimality, and equilibrium. These results are unified with two key concepts, state prices and martingales. Technicalities are given relatively little emphasis, so as to draw connections between these concepts and to make plain the similarities between discrete and continuous-time models.
Readers will be particularly intrigued by this latest edition's most significant new feature: a chapter on corporate securities that offers alternative approaches to the valuation of corporate debt. Also, while much of the continuous-time portion of the theory is based on Brownian motion, this third edition introduces jumps--for example, those associated with Poisson arrivals--in order to accommodate surprise events such as bond defaults. Applications include term-structure models, derivative valuation, and hedging methods. Numerical methods covered include Monte Carlo simulation and finite-difference solutions for partial differential equations. Each chapter provides extensive problem exercises and notes to the literature. A system of appendixes reviews the necessary mathematical concepts. And references have been updated throughout. With this new edition, Dynamic Asset Pricing Theory remains at the head of the field.
Customer Reviews:
painful and obscure.......2005-12-24
The mathematics of finance is not trivial, but neither is it really all that difficult; nevertheless, Duffie works to make you think that it is.
I maintain a scale of good versus bad mathematics writing in my head, against which I calibrate books I read. This scale stretches from, at one end, the faculty of Moscow University, in particular Israel Gelfand, Vladimir Arnold and Andre Kolmogorov, all of whom manage to explain to me hard things so that they seem easy, to, at the other, Darrell Duffie.
Finance for economists.......2005-04-27
This book provides the most elegant and coherent synthesis of finance theory, in a complete markets and frictionless settings.
For the reader interested in the theoretical foundations of modern financial models, this book has three main advantages over many of its competitors:
- It clearly shows the link between modern finance theory and the 40-year old Arrow-Debreu model. As this book will make clear, financial assets can be viewed as "bundles" of Arrow-Debreu contingent goods, and pricing kernels are simply extensions of Arrow-Debreu contingent state prices.
- It bridges the gap between arbitrage models on one hand, and models based on consumption, optimization/dynamic programming and general equilibrium on the other hand. Absence of arbitrage guarantees the existence of a stochastic discount factor, or pricing kernel. Optimality implies that the stochastic discount factor must be equal to the investors' intertemporal marginal rate of substitution.
- It provides a unified treatment of discrete-time and continuous-time models. Many finance textbooks focus on the mathematic tools and emphasize the difference between continuous-time and discrete-time tools--usually at the expense of the economics underlying both types of models. In contrast Duffie's book emphasizes the conceptual unity between continuous-time and discrete-time asset pricing.
This book was written more for students and academics than for pratictioners. It is not a reference or a recipe book for traders and programmers. Several chapters are devoted to general-equilibrium models that pratictioners are not likely to find useful. However, the essentials of derivative asset pricing and the term structure are also covered. The latest edition even includes a chapter on corporate finance.
Finally, this book is pretty much self-contained. All the graduate-level math results used in the proofs are presented either in the main body of the book, or in appendices.
Demanding but rewarding!.......2003-09-30
First of all, this book is for people with advanced mathematical preparation. Courses in functional analysis, measure theory, stochastic calculus and vector space optimization are in my opinion required for a deep understanding of the material in the book. Fortunately, the appendices are very good and provide many things that can help someone to follow the book.
In the first four chapters the writer develops the discrete-time theory,in order to provide a better understanding of the underlying ideas which remain the same in the next chapters which deal with the continuous-time setting.
Although the book needs a lot of effort from the reader, it is unique in that can help you see beyond the mathematics. In other words it USES the mathematics and it isn't just a layout of theorems and proofs.
Of course it can't be compared with books like Hull as it isn't accessible to everyone. But someone with the mathematical preparation , who has read Hull , should buy this book and he will never regret it.
best intro of finance for math guys.......2001-12-03
I am taking a phd level course which uses this book. For math guys, SDE and MG theory covered in this book are fine, but it is still somekind of tricky to fill in some details of proof. As author said, the latter chapters are just repeating the first two chapters in a fancy math way. It is better to understand the first two chapters very well and then go further. For optimal portfolio and consumption part, I prefer Merton's notes and his CTF. Whatever, this book is great and very neat for integrating the whole theory.
A tricky book.......2001-11-03
This book, whilst being very impressive i didn't really find helpful as a learning tool. A good knowledge of the subject is required otherwise it is almost impossible to follow.
I'm studying a masters in finance, and would say it goes well beyond what we need to know for such a course. Maybe maths & finance students would cover things in this.
I am amazed that people actually use such a comllicated book in practice!!
Book Description
Written by one of the leading experts in the field, this book focuses on the interplay between model specification, data collection, and econometric testing of dynamic asset pricing models. The first several chapters provide an in-depth treatment of the econometric methods used in analyzing financial time-series models. The remainder explores the goodness-of-fit of preference-based and no-arbitrage models of equity returns and the term structure of interest rates; equity and fixed-income derivatives prices; and the prices of defaultable securities.
Singleton addresses the restrictions on the joint distributions of asset returns and other economic variables implied by dynamic asset pricing models, as well as the interplay between model formulation and the choice of econometric estimation strategy. For each pricing problem, he provides a comprehensive overview of the empirical evidence on goodness-of-fit, with tables and graphs that facilitate critical assessment of the current state of the relevant literatures.
As an added feature, Singleton includes throughout the book interesting tidbits of new research. These range from empirical results (not reported elsewhere, or updated from Singleton's previous papers) to new observations about model specification and new econometric methods for testing models. Clear and comprehensive, the book will appeal to researchers at financial institutions as well as advanced students of economics and finance, mathematics, and science.
Customer Reviews:
A good choice.......2007-02-12
A fantastic book. It's build in three parts: I-Numerics and Econometrics, II- preference based valuation and III-Arbitrage Valuation. Very useful for finance researchers.
Moreover is not an expensive book (compared with similars).
Book Description
Pick the right model for the right moment every time. Whatever your investment philosophy and goals, you've probably had trouble at one time or another in measuring the value of a particular asset. Maybe you've been wary of the effectiveness of all the valuation models out there and relied on the "guesstimate" approach or simply picked the wrong model for the asset under consideration. Whatever past problems you may have encountered, Damodaran on Valuation will not only convince you of the vitality of the many valuation models available to you, it will help ensure that you develop the acumen needed to select the right model for any valuation scenario. Written by a gifted teacher and respected valuation authority, Damodaran on Valuation offers an overview of the three basic valuation approaches—discounted cash flow, relative, and contingent claim valuation—and the models within these classes. Using plenty of real-world case studies, it explains the purpose of each model, its pros and cons, the steps involved in applying it, and the types of firms to which it is most suited. Soon, you'll have a solid, practical grasp of tools designed to help you estimate the cost of equity, estimate growth rates, value equity, measure free cash flows to equity, value firms, estimate the value of assets via pricing of comparable assets, and measure the value of assets with option-like characteristics. No model is foolproof. And every valuation is vulnerable to changes in the environment, the economy, and the asset itself. But with Damodaran on Valuation at your side, you can be certain that you'll have every weapon at your disposal in the battle to accurately determine the value of an asset and to make the right financial decisions under pressure.
Customer Reviews:
Good but only short version of another.......2001-10-26
As everyone will agree, this is a good book in valuation tools. With different version of the DCF models, this book is one of the ideal desk reference of security analysis. However, if you also look at the book "Investment Valuation" by Professor Damodaran, you will agree that this one is only a short version of "Investment Valuation". Almost every topic is covered (or copied) from "Investment Valuation".
I gave "Investment Valuation" a 5-star rating. So, for its short version, I give 4-star.
Great book on valuation (mainly equity).......2001-06-07
The book is mainly aimed at valuation practitioners and MBA sudents. The book deals with 3 valuation techniques- DCF, relative valuation (based on PE, P/BV, PS multiples) and contingent claims (options). Great insights into determining key variables (PE, PS, P/BV) based on business fundamentals and pro and cons of using each approach. However, the book does not go into enough depth in CAPM and APT. The author assumes that the reader would have a fair idea about financial ratios, fundamentals etc. The best part of the book deals with valuation of special cases like cyclical firms, brands etc. and how corporate restructuring affects value. It also provides great insights into valuation for takeovers and mergers. The author provides a usable framework for valuing intangibles in an acquisition target- what the different sources of synergy are and how to value each in a lucid framework. Overall, a good book to gain a firm footing in investment valuation techniques.
First Rate.......2001-03-16
This is an excellent book. It serves as both a course in valuation as well as a useful reference tool.
The book is heavily weighted to discounted cash flow analysis, though it also discusses relative valuation (like P/E multipliers) and contingent claims.
Clearly written the book presents in detail simple to complex DCF based models (dividend discount model, free cashflow to equity and free cashflow to the firm). This range of models deal with the complex valuation problem of variable growth. After presenting a model, its limitations and best uses are explained.
He then shows how these models can be used to derive P/E, P/S, and P/BV ratios from fundamentals.
Abundant examples are used to make the material clear.
The book also discusses special situations, e.g., cyclical firms, and distressed firms to mention just a few.
At first glance this book might be mistaken for a "cook book". Lots of formulas and detailed examples of how to work them.
But there is more. And this is where the real "meat" of the book is - underpinning the seeming forest of details and examples - is a valuation logic and philosophy.
If you read this book carefully, you will develop an appreciation for the impact certain fundamentals have on valuation and how they interact with one another. This is much more important than memorizing the formulae in the book.
Also there is some very useful and frank discussion of shortcomings in some of the tools used, including the CAPM and a warning about being seduced into believing that the DCF approach results in certainty.
Valuation involves estimates and formulas (or multiples) are simplifications of very complex real world dynamics. In the businss world, valuation is typically a process of estimating ranges of values for each of several methods chosen (e.g., DCF, market comparables, precedent transacions, replacement value, etc). The resulting matrix of values is then compared (in effect cross checked) to come up with a range of possible values. And here the differences between buyer and seller affect the outcome - different assumptions re the DCF or the cashflow and synergies that can be achieved - come into play to create two different matrices of values - from which the two parties then negotiate the actual price.
The book and its author are well regarded. This particular volume is used in AIMR's CFA study program - which is a measure of its worth.
A good introductory valuation book.......2000-10-06
This book provides a good introduction for those who want to learn valuation. Explained in simple English, the book describes many tools on how to do the valuation, particularly for stock valuation (DCF, P/E ratio, etc.).
I particularly like the explanation of various models of DCF. The author clearly explains the strengths and weaknesses of each models, possible problems and the solutions to the problems.
However, I found that this book lacks more in-depth analysis of the topics covered. Furthermore, I found that the CAPM model, to some extent, does not truly exist in the real corporate world. I have read many valuation reports from big names in investment banking, many of them do not adopt CAPM (for various reasons that make CAPM unapplicable, which are also inherent weaknesses of CAPM, they just put x% as the discount rate). Only few who still stick to CAPM. There should be a bridge between academic and real world applications. A more detailed discussion on CAPM by the author would resolve this issue.
Damordoran on Valuation.......2000-03-25
This is a great book. It has a lot of helpful valuation techniques and I find them really useful. I particularly like the part on relative valuation method and the way to solve the problem of evaluating P/E multiple of different countries. Very useful indeed. But there is a missing piece about P/S multiple. It is entirely based on DDM. What about company which is not expected to pay out dividend for the coming 20 years. This is a great book and the basic valuation methods are very well covered and explained.
Book Description
This book shows how current and recent market prices convey information about the probability distributions that govern future prices. Moving beyond purely theoretical models, Stephen Taylor applies methods supported by empirical research of equity and foreign exchange markets to show how daily and more frequent asset prices, and the prices of option contracts, can be used to construct and assess predictions about future prices, their volatility, and their probability distributions.
Stephen Taylor provides a comprehensive introduction to the dynamic behavior of asset prices, relying on finance theory and statistical evidence. He uses stochastic processes to define mathematical models for price dynamics, but with less mathematics than in alternative texts. The key topics covered include random walk tests, trading rules, ARCH models, stochastic volatility models, high-frequency datasets, and the information that option prices imply about volatility and distributions.
Asset Price Dynamics, Volatility, and Prediction is ideal for students of economics, finance, and mathematics who are studying financial econometrics, and will enable researchers to identify and apply appropriate models and methods. It will likewise be a valuable resource for quantitative analysts, fund managers, risk managers, and investors who seek realistic expectations about future asset prices and the risks to which they are exposed.
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General
| Popular Economics
| Business & Investing
| Subjects
| Books
The Econometrics of Financial Markets
Dynamic Asset Pricing Theory, Third Edition.
Time Series Analysis
The Theory of Corporate Finance
Empirical Dynamic Asset Pricing: Model Specification and Econometric Assessment
