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Book Summary of Financial Economics
This book examines economic activity in financial markets: how capital assets are priced and how these prices change over time. The analysis starts in a certainty setting by exploring way individuals use financial securities to choose their current and future consumption flows, before moving on to an uncertainty setting where security prices are obtained using standard intermediate microeconomic analysis that relies heavily on the use of diagrams to bring together the demand and supply decisions of traders in financial markets.
The book provides an excellent introduction to the basic classical finance model where financial assets are a veil over the real economy.
Most undergraduate finance textbooks emphasize explaining the institutional aspects of financial markets and rely heavily on partial equilibrium analysis, while most graduate finance textbooks use formal general equilibrium analysis. The analysis in this book sits between these two approaches and thus provides the student with a nuts and bolts guide to the whole area of financial economics.
Whilst many undergraduate finance textbooks are largely descriptive in nature, the economic analysis in most graduate texts is too advanced for latter year undergraduates. This book bridges the gap between these two extremes, offering a textbook that studies economic activity in financial markets, focusing on how consumers determine future consumption and on the role of financial securities.
Areas covered in include:
an examination of the role of finance in the economy using basic economic principles, eventually progressing to introductory graduate analysis
a microeconomic study of capital asset pricing when there is risk, inflation, taxes and asymmetric information
an emphasis on economic intuition using geometry to explain formal analysis
an extended treatment of corporate finance and the evaluation of public policy. isbn
9780415375856
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Pages : 336
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