The Economics of Financial Markets

As a law student with an econ degree, I was looking for a way to review concepts I had learned in a financial economics course without having to lug around Copeland and Weston. I found this book covered all the concepts I was looking for at a deep enough level and with enough math to keep me satisfied. This book was written for MBA's or advanced undergradute business majors, but to that list I would also include two more groups: (1) those with a background in econ or math that wish to review concepts learned long (or not so long) ago, and (2) anyone wishing to gain a deeper understanding of financial markets through applying a more rigorous, scientific approch. This book teaches basic financial principles like the risk-return relationship, the CAPM, efficient market hypothesis, and option pricing. Hopefully this book will help deter some of those hoping to find a "get rich quick" method of investment that systematically "beating the market" is not possible in the long run.

The intention behind this book was to provide a solid introduction and overview of financial economics and financial institutions. The authors suceed brilliantly in those goals. Most people with limited training in economics and mathematics should be able to understand the book (so, for example, this book would be great for early undergraduates or MBA students who have not been exposed to finance or economics). I think there is enough information in this book to be of some use to even people who have more advanced training. Why? This book gives a good overview of both the theoretical (deductive proofs) and empirical (econometric) research that has been done on various topics (relatively up to date). The book tries to give a balanced view of the merits or problematics of any particular theory in financial economics.This book deserves a 5 star rating rather than a 4 star one because for what it was intended to be -- a solid introduction and overview -- it does a superb job. It would be unfair to judge any book by some unintended higher standard when it does a great job at doing what it intended to do. Bottom line: If you need a good introduction to financial economics, this is a good place to start.

This book presents the basic economic concepts behind daily activities on financial markets, such as stock price or exchange rate movement, and tries to explain the relations between them. It briefly introduces choice under uncertainty, risk aversion, portfolio optimization problems, market efficiency hypothesis, and equilibrium of asset markets. In addition, the Capital Asset Pricing Model (CAPM), and Arbitrage Pricing Theory (APT) are presented. It brings the most exciting part of academic evolution of financial economics in the last three decades to the pubic with modest knowledge of mathematics. It also shows the weakness of these theories. Very self-contained and readable. However, if you want to pursue a ground understanding of these theories, you should go further.