Microfoundations of Financial Economics: An Introduction to General Equilibrium Asset Pricing

Microfoundations of Financial Economics: An Introduction to General Equilibrium Asset Pricing

by Yvan Lengwiler
     
 

ISBN-10: 0691113157

ISBN-13: 9780691113159

Pub. Date: 03/22/2004

Publisher: Princeton University Press

This textbook takes the reader from the level of microeconomics principles through to modern asset pricing theory. Yvan Lengwiler elegantly links together issues that have in the past been the territory of general economic theorists on the one hand, and financial economists on the other.

In a sequence of carefully explained steps, the reader learns how the first

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Overview

This textbook takes the reader from the level of microeconomics principles through to modern asset pricing theory. Yvan Lengwiler elegantly links together issues that have in the past been the territory of general economic theorists on the one hand, and financial economists on the other.

In a sequence of carefully explained steps, the reader learns how the first welfare theorem is used in asset pricing theory. The book then moves on to explore Radner economies and von Neumann-Morgenstern decision theory, and this section culminates in Wilson's mutuality principle and the consumption-based CAPM. This is then put into a dynamic setting, and term structure models are introduced. The empirical shortcomings of the standard asset pricing models are extensively discussed, as is research from the last twenty years aimed at bringing theory in line with reality. The reader is brought up to date on the latest areas of concern, such as habit formation, the consequences of heterogeneity, demographic effects, changing tax regimes, market frictions, and the implications of prospect theory for asset pricing.

Aimed at masters or Ph.D. students specializing in financial economics, the book can also be used as a supplementary text for students of macroeconomics at this advanced level and will be of interest to finance professionals with a background in economics and mathematics. It includes problems (with solutions), and an accompanying website provides supporting material for lecturers.

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Product Details

ISBN-13:
9780691113159
Publisher:
Princeton University Press
Publication date:
03/22/2004
Series:
Princeton Series in Finance Series
Pages:
304
Product dimensions:
6.10(w) x 9.30(h) x 1.00(d)

Table of Contents

List of boxes
Preface
1Introduction1
2Contingent claim economy10
3Asset economy37
4Risky decisions68
5Static finance economy102
6Dynamic finance economy141
7Empirics and the puzzles172
8Adapting the theory199
9Epilog239
App. A: Symbols and notation245
App. B: Solutions to the problem sets247
Bibliography269
Index285

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