Investors and Markets: Portfolio Choices, Asset Prices, and Investment Advice (Princeton Lectures in Finance)
Average customer rating: 4.5 out of 5 stars
  • good new book for good price
  • Important read for professional investors
  • "Normative Issues in a Positive Context"
Investors and Markets: Portfolio Choices, Asset Prices, and Investment Advice (Princeton Lectures in Finance)
William F. Sharpe
Manufacturer: Princeton University Press
ProductGroup: Book
Binding: Hardcover

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ASIN: 0691128421

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:

5 out of 5 stars 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.

4 out of 5 stars 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.

5 out of 5 stars "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.
Firms, Contracts, and Financial Structure (Clarendon Lectures in Economics)
Average customer rating: 3 out of 5 stars
  • A classic on the theory of the firm
  • Abstract Theory at its ugliest
  • THE Classic
  • A THEORY of the firm
Firms, Contracts, and Financial Structure (Clarendon Lectures in Economics)
Oliver Hart
Manufacturer: Oxford University Press, USA
ProductGroup: Book
Binding: Paperback

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ASIN: 0198288816

Book Description

This book provides a framework for thinking about economic instiutions such as firms. The basic idea is that institutions arise in situations where people write incomplete contracts and where the allocation of power or control is therefore important. Power and control are not standard concepts in economic theory. The book begins by pointing out that traditional approaches cannot explain on the one hand why all transactions do not take place in one huge firm and on the other hand why firms matter at all. An incomplete contracting or property rights approach is then developed. It is argued that this approach can throw light on the boundaries of firms and on the meaning of asset ownership. In the remainder of the book, incomplete contacting ideas are applied to understand firms' financial decisions, in particular, the nature of debt and equity (why equity has votes and creditors have foreclosure rights); the capital structure decisions of public companies; optimal bankruptcy procedure; and the allocation of voting rights across a company's shares. The book is written in a fairly non-technical style and includes many examples. It is aimed at advanced undergraduate and graduate students, academic and business economists, and lawyers as well as those with an interest in corporate finance, privatization and regulation, and transitional issues in Eastern Europe, the former Soviet Union, and China. Little background knowledge is required, since the concepts are developed as the book progresses and the existing literature is fully reviewed.

Customer Reviews:

5 out of 5 stars A classic on the theory of the firm.......2003-12-04

Consider an economic relationship where relationship-specific investments are important and transaction costs make it impossible to write a comprehensive long-term contract to govern the terms of the relationship. Consider also the nonhuman assets that, in the post-investment stage, make up this relationship. Given that the initial contract has gaps, missing provisions, or ambiguities, situations will occur in which some aspects of the use of these assets are not specified. Take the position that the right to choose these missing aspects of usage resides with the 'owner' of the asset. That is, ownership of an asset goes together with the possession of residual rights of control over that asset; the owner has the right to use the asset in any way not inconsistent with a prior contract, custom, or any law. Finally, identify a firm with all the nonhuman assets that belong to it, assets that the firms's owners possess by virtue of being owners of the firm. Included in this category are machines, inventories, buildings or locations, cash, client lists, patents, copyrights, and the rights and obligations embodied on outstanding contract to the extent that these are also transferred with ownership. Human assets, however, are not included. Since human assets cannot be bought or sold, management and workers presumably own their own human capital.

We now have the basic ingredients of a theory of the firm. This theory has become known as the property rights approach to the theory of the firm. In a world of transaction costs and incomplete contracts, ex post residual rights of control will be important because, through their influence on asset usage, they will affect ex post bargaining power and the division of ex post surplus in a relationship. This division in turn will affect the incentives of actors to invest in that relationship. Hence, when contracts are incomplete, the boundaries of firms matter in that these boundaries determine who owns and controls which assets. In particular, a merger of two firms does not yield unambiguous benefits: to the extent that the (owner-)manager of the acquired firm loses control rights, his incentive to invest in the relationship will decrease. In addition, the shift in control may lower the investment incentives of workers in the acquired firm. In some cases these reductions in investment will be sufficiently great that non integration is preferable to integration.

Note that, according to this theory, when assessing the effects of integration, one must know not only the characteristics of the merging firms, but also who will own the merged company. If firms A and B integrate and A becomes the owner of the merged company, then A will presumably control the residual rights in the new firm. A can use those rights to hold up the managers and workers of firm B. Should the situation be reversed, a different set of control relations would result in B exercising control over A, and A's workers and managers would be liable to holdups by B.

Hart's book gives us an introduction to this world of the property rights approach to the theory of the firm. In the first part Hart considers the traditional approaches to the firm and argues that these approaches can not explain why all production does not take place within one firm or even why firms matter at all. His answers to these problems are developed via the property rights approach to the firm. Development of this theory covers chapters 2-4. Chapter 2 outlines the property rights approach, chapter 3 looks at issues that arise from this approach and chapter 4 discusses the foundations of the incomplete contracting model. In part 2 of the book Hart considers the financial structure of firms. The nature of debt and equity, the capital structure decisions of public firms, bankruptcy procedures are all covered. The book is written in a very readable manner and is non-technical enough to mean that both (advanced) undergraduate and graduate students will be able to read it. For anyone with a interest in the theory of the firm this is a must read.

1 out of 5 stars Abstract Theory at its ugliest.......2000-04-21

I had the unfortunate dislpeasure of having to read this as one of the required books for a PhD class in Managerial/Business Economics. Suffice to say...the book is a complete waste of time and not worth the trees it took to print it. I understand Hart is brilliant...teaches at Oxford & Harvard...receives full salary at both...he's tops in his field. Yet, what this book contains has absolutely nothing to do with reality. It is abstract theory at its finest...or rather, worst! PhD work is theoretical...that's a given. But this book is still worthless, even for someone like myself studying for my PhD in Business Economics. You learn nothing about corporations, business practices or strategy, finance...etc. What is the point to studying this theory of financial structure that is so far removed from reality that you finish the semester wondering..."gee, what have I actually learned in the last four months". If your aim is for applied work, your likely answer will be NOTHING. Even though the mathematics used are fairly basic,the book is very difficult to read. Turning the pages is a very slow process. You learn nothing about the workings of real world finance by reading through this intellectuals collection of useless writings. I'm sure it boosted his ego, but it does nothing for the business student to understand the reasons for different choices of capital structure. Your time would be much better spent reviewing the chapters in Brealy and Meyers on capital structure, or Damodoran's book on Corporate Finance: Theory & Practice.(now that is a good book). If you want to learn about the nature of contracts WITHIN firms and how they are used to accomplish managerial objectives and provide proper incentives where needed, read Milgrom & Roberts or any good book on Managerial Economics. Even for Phd students in Finance, this book is a waste of your time!

5 out of 5 stars THE Classic.......2000-04-21

This book is regarded as THE classic by most professional economists. We can't talk about the theory of the firm without referring to this book, which is written with exceptional clarity and depth.

2 out of 5 stars A THEORY of the firm.......2000-03-26

This book presents a theory of the firm. It is targeted for graduate students in Economics. It is a must have if you plan to research in this field and it is remarkably clear! The mathematics is incredibly easy compared to other 2nd year Econ PhD books. I think even undergraduates usually know enough Math to go through the main chapters.
The book is purely theoretical and only very abstract-minded people will like it. If your specialization is applied I.O. you still might want to read the book for background knowledge, but I doubt it will be of much use to you (no econometrics here, and very little econometrics to be done even if you wanted to)

On the other hand, it is probably not going to be of any use to you if you are not a graduate student in Economics. It is *far* too abstract for management.

Now briefly to the content:
The first chapter reviews previous approaches to the theory of the firm (transaction costs...)
Property right approach and incomplete contract approach are the main point of the book. The role and the boundary of the firm are explained using concepts such as "property rights", "residual power of control", "specific investments".
The second part of the book is mainly about financial structure. Of the second part, I studied only the last chapter on voting rights. It explains how the voting structure should be set up (how many votes per share, how many classes of shares, majority voting...) according to expected private benefits of control by the incumbent management and the management making the tender offer.

So why only two stars? The theories presented here seem to me less satisfactory than many others in Economics.
I think there are fields in Economics that convey the right intuition. Hart's book does not give that impression to me. Unfortunately, I don't have anything better to propose otherwise my dissertation would be done.
Gatekeepers: The Role of the Professions in Corporate Governance (Clarendon Lectures in Management Studies)
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    Gatekeepers: The Role of the Professions in Corporate Governance (Clarendon Lectures in Management Studies)
    John C. Coffee
    Manufacturer: Oxford University Press, USA
    ProductGroup: Book
    Binding: Hardcover

    GeneralGeneral | Organizational Behavior | Business & Investing | Subjects | Books
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    4. Lying, Cheating, and Stealing: A Moral Theory of White-Collar Crime (Oxford Monographs on Criminal Law and Justice) Lying, Cheating, and Stealing: A Moral Theory of White-Collar Crime (Oxford Monographs on Criminal Law and Justice)
    5. The Recurrent Crisis in Corporate Governance The Recurrent Crisis in Corporate Governance

    ASIN: 0199288097

    Book Description

    In the wake of a series of corporate governance disasters in the US and Europe which have gained almost mythic status - Enron, WorldCom, Tyco, Adelphia, HealthSouth, Parmalat - one question has not yet been addressed. A number of 'gatekeeping' professions - auditors, attorneys, securities analysts, credit-rating agencies - exist to guard against these governance failures. Yet clearly these watchdogs did not bark while corporations were looted and destroyed. But why not? To answer these questions, a more detailed investigation is necessary that moves beyond journalism and easy scapegoating, and examines the evolution, responsibilities, and standards of these professions. John Coffee, world-renowned Professor of Corporate Law, examines how these gatekeeping professions developed, to what degree they failed, and what reforms are feasible. Above all, this book examines the institutional changes and pressures that caused gatekeepers to underperform or neglect their responsibilities, and focuses on those feasible changes that can restore gatekeepers as the loyal agents of investors. This informed and readable view of the players on the contemporary business stage will be essential reading for investors, professionals, executives and business academics concerned with issues of good governance.
    Lawlessness and Economics: Alternative Modes of Governance (The Gorman Lectures)
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      Lawlessness and Economics: Alternative Modes of Governance (The Gorman Lectures)
      Avinash K. Dixit
      Manufacturer: Princeton University Press
      ProductGroup: Book
      Binding: Hardcover

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      ASIN: 0691114862

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      How can property rights be protected and contracts be enforced in countries where the rule of law is ineffective or absent? How can firms from advanced market economies do business in such circumstances? In Lawlessness and Economics, Avinash Dixit examines the theory of private institutions that transcend or supplement weak economic governance from the state.

      In much of the world and through much of history, private mechanisms--such as long-term relationships, arbitration, social networks to disseminate information and norms to impose sanctions, and for-profit enforcement services--have grown up in place of formal, state-governed institutions. Even in countries with strong legal systems, many of these mechanisms continue under the shadow of the law. Numerous case studies and empirical investigations have demonstrated the variety, importance, and merits, and drawbacks of such institutions.

      This book builds on these studies and constructs a toolkit of theoretical models to analyze them. The models shed new conceptual light on the different modes of governance, and deepen our understanding of the interaction of the alternative institutions with each other and with the government's law. For example, one model explains the limit on the size of social networks and illuminates problems in the transition to more formal legal systems as economies grow beyond this limit. Other models explain why for-profit enforcement is inefficient. The models also help us understand why state law dovetails with some non-state institutions and collides with others. This can help less-developed countries and transition economies devise better processes for the introduction or reform of their formal legal systems.

      Political Determinants of Corporate Governance: Political Context, Corporate Impact (Clarendon Lectures in Management Studies)
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        Political Determinants of Corporate Governance: Political Context, Corporate Impact (Clarendon Lectures in Management Studies)
        Mark J. Roe
        Manufacturer: Oxford University Press, USA
        ProductGroup: Book
        Binding: Paperback

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        ASIN: 0199205302

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        Before a nation can produce, it must achieve social peace. That social peace has been reached in different nations by differing means, some of which have then been embedded in business firms, in corporate ownership patterns, and in corporate governance structures. The large publicly held, diffusely owned firm dominates business in the United States despite its infirmities, namely the frequently fragile relations between stockholders and managers. But in other economically advanced nations, ownership is not diffuse but concentrated. It is concentrated in no small measure because the delicate threads that tie managers to shareholders in the public firm fray easily in common political environments, such as those in the continental European social democracies. Social democracies press managers to stabilize employment, to forego some profit-maximizing risks with the firm, and to use up capital in place rather than to downsize when markets no longer are aligned with the firm's production capabilities. Since managers must have discretion in the public firm, how they use that discretion is crucial to stockholders, and social democratic pressures induce managers to stray farther than otherwise from their shareholders' profit-maximizing goals. Moreover, the means that align managers with diffuse stockholders in the United States-incentive compensation, hostile takeovers, and strong shareholder-wealth maximization norms-are weaker and sometimes denigrated in continental social democracies. Hence, public firms there have higher managerial agency costs, and large-block shareholding has persisted as shareholders' best remaining way to control those costs. Social democracies may enhance total social welfare, but if they do, they do so with fewer public firms than less socially responsive nations. The author therefore uncovers not only a political explanation for ownership concentration in Europe, but also a crucial political prerequisite to the rise of the public firm in the United States, namely the weakness of social democratic pressures on the American business firm.
        Design of Master Agreements for OTC Derivatives (Lecture Notes in Economics and Mathematical Systems)
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          Design of Master Agreements for OTC Derivatives (Lecture Notes in Economics and Mathematical Systems)
          Dietmar Franzen
          Manufacturer: Springer
          ProductGroup: Book
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          ASIN: 3540679340

          Book Description

          The book deals with the design of bilateral contractual arrangements for OTC (over-the-counter)-traded derivatives transactions. These arrangements govern inter alia the rights and obligations of the parties in the event of a default. The main provisions of the widely used ISDA Master Agreements as well as their relation to insolvency law are described in the text. The formal analysis focuses on the trade-off between protecting the interests of the non-defaulting party and enabling the failed counterparty to reorganize its liabilities in order to avoid inefficient liquidations. The results of the book challenge some widely held beliefs about the benefits of certain provisions commonly used in master agreements. The analysis also suggests implications for the pricing of risky derivatives transactions containing these provisions.
          Understanding the Financial Score (Synthesis Lectures on Technology, Management and Entrepreneurship)
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            Understanding the Financial Score (Synthesis Lectures on Technology, Management and Entrepreneurship)
            Henry E. Riggs
            Manufacturer: Morgan and Claypool Publishers
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            Release Date: 2007-04-02
            Lectures on Corporate Finance
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              Lectures on Corporate Finance
              Peter L. Bossaerts , and Bernt Arne Degaard
              Manufacturer: World Scientific Publishing Company
              ProductGroup: Book
              Binding: Hardcover

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              ASIN: 9812568999

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              This course of lectures - developed and taught at the Yale School of Management and the California Institute of Technology - introduces students to elementary concepts of corporate finance using a more systematic approach than is generally found in other textbooks.

              Within a simple logical framework, axioms are first highlighted and the implications of these important concepts are studied. These implications are used to answer questions about corporate finance, including issues related to derivatives pricing, state price probabilities, dynamic hedging, dividends, capital structure decisions, and risk and incentive management. Numerical examples are provided, and the mathematics is kept simple throughout.

              The book complements standard texts on the subject and will be invaluable for upper level undergraduate and graduate students, as well as MBA students.
              Commerce Et Marketing: Lectures Et Vocabulaire En Francais (Business and Marketing)
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                Commerce Et Marketing: Lectures Et Vocabulaire En Francais (Business and Marketing)
                Conrad J. Schmitt , and Katia Brillé Lutz
                Manufacturer: McGraw-Hill
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                1. Tourisme Et Hotellerie: Lectures Et Vocabulaire En Francais, (Tourism and Hotel Management) Tourisme Et Hotellerie: Lectures Et Vocabulaire En Francais, (Tourism and Hotel Management)

                ASIN: 0070568111

                Book Description

                Special Purpose Series In French and Spanish

                With a growing number of companies looking for employees who can "speak the business" in a foreign language, individuals will find the competition for jobs fiercer than ever. Everyone can prepare for these challenges by choosing from this unique series.

                Future of the Corporation (Pfizer Lecture)
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                  Future of the Corporation (Pfizer Lecture)
                  Michael Novak
                  Manufacturer: AEI Press
                  ProductGroup: Book
                  Binding: Paperback

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                  ASIN: 0844770809

                  Book Description

                  This book reviews the long history of the corporation and examines the central role of business and economic growth in the strengthening of civil society and democracy.

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