"Neoclassical Finance" provides a concise and powerful account of the underlying principles of modern finance, drawing on a generation of theoretical and empirical advances in the field. Stephen Ross developed the no arbitrage principle, tying asset pricing to the simple proposition that there are no free lunches in financial markets, and jointly with John Cox he developed the related concept of risk-neutral pricing. In this book Ross makes a strong case that these concepts are the fundamental pillars of modern finance and, in particular, of market efficiency. In an efficient market prices reflect the information possessed by the market and, as a consequence, trading schemes using commonly available information to beat the market are doomed to fail.
By stark contrast, the currently popular stance offered by behavioral finance, fueled by a number of apparent anomalies in the financial markets, regards market prices as subject to the psychological whims of investors. But without any appeal to psychology, Ross shows that neoclassical theory provides a simple and rich explanation that resolves many of the anomalies on which behavioral finance has been fixated.
Based on the inaugural Princeton Lectures in Finance, sponsored by the Bendheim Center for Finance of Princeton University, this elegant book represents a major contribution to the ongoing debate on market efficiency, and serves as a useful primer on the fundamentals of finance for both scholars and practitioners.
"Neoclassical Finance is a significant contribution to the field that deserves to be widely cited. Stephen Ross provides a clear and concise discussion of basic theory, a new and in some ways unique look at arbitrage and market efficiency, and resolves a long-standing empirical puzzle about closed end funds." - Richard Roll, Japan Alumni Chair in Finance, Anderson School of Business at the University of California, Los Angeles"
PREFACE ix CHAPTER ONE: No Arbitrage: The Fundamental Theorem of Finance 1 CHAPTER TWO: Bounding the Pricing Kernel, Asset Pricing, and Complete Markets 22 CHAPTER THREE: Efficient Markets 42 CHAPTER FOUR: A Neoclassical Look at Behavioral Finance: The Closed-End Fund Puzzle 66 BIBLIOGRAPHY 95 INDEX 101
Series: Princeton Lectures in Finance
Tertiary; University or College
For Ages: 1 - 17 years old
Number Of Pages: 120
Published: 11th October 2004
Publisher: Princeton University Press
Country of Publication: US
Dimensions (cm): 24.5 x 16.6
Weight (kg): 0.36