Asset pricing and portfolio choice theory kerry back. Kerry back has created a masterful introduction to asset pricing and portfolio choice. It also treats various proposed explanations for the equity premium and riskfree rate. Asset pricing and portfolio choice theory financial. It also treats asymmetric information, production models, various. Kerry back 2010, asset pricing and portfolio choice theory, oxford university press.
Kerry back asset pricing and portfolio choice theory, 2nd ed info. Aug 31, 2009 the theory that explains the individuals or the firms asset allocation decision is known as the theory of asset demand or portfolio choice. The aim of diversification is to reduce total risk without sacrificing. In asset pricing and portfolio choice theory, kerry e. Back at last offers what is at once a welcoming introduction to and a comprehensive. Reduction of portfolio risk through diversification. For valuation, the focus throughout is on stochastic discount factors and their properties. A normative theory is one that describes a standard or norm of behavior that investors should pursue in constructing a portfolio, in contrast to a theory that is actually followed. So in the absence of a riskfree asset, an investor can achieve any desired efficient portfolio even if all that is. Topics covered include i noarbitrage, arrowdebreu prices, and equivalent. Certainty equivalents and secondorder risk aversion 8 1. It also discusses actual lifecycle plans and the advantages and disadvantages of these types of funds. The aim of this course is to introduce students to the modern theory of asset pricing, portfolio theory and derivatives pricing. Intended as a textbook for asset pricing theory courses at the ph.
Everyday low prices and free delivery on eligible orders. Back offers a concise yet comprehensive introduction to and overview of asset pricing. Chapter 21 modern portfolio theory equilibrium asset pricing. Preface to the first edition xv preface to the second edition xvi asset pricing and portfolio puzzles xvii part one singleperiod models 1. Asset pricing and portfolio choice theory financial management association survey and synthesis 97801953806. Most tests of asset pricing models address only the pricing. Pdf asset pricing and portfolio choice theory semantic scholar.
Leroy and jan werner l, 2001, principles of financial. It covers the classical results on singleperiod, discretetime, and continuoustime models. The legacy of modern portfolio theory it is illegal to. Back offers a concise yet comprehensive introduction to and overview. Chapter 5 modern portfolio theory introduction one of the major concepts that most investors should be aware of is the relationship between the risk and the return of a financial asset.
Jan 01, 2010 in asset pricing and portfolio choice theory, kerry e. Financial economics asset pricing and portfolio selection lecture 4 hongtao zhou 4 arbitrage and stochastic discount factors the previous chapter established that, under fairly restrictive conditions, there is a stochastic discount factor that is a function of market wealth in fact, proportional to a repre. Great as a reference book after you already learned it all elsewhere. Asset pricing and portfolio choice theory oxford scholarship. Pdfasset pricing and portfolio choice theory free ebooks. The coverage of topics is comprehensive, starting in a singleperiod setting and then moving naturally to dynamic models in both discrete and continuous time.
Asset pricing and portfolio choice theory by kerry back i have the book, its good. Portfolio choicetheory of asset demand sindbad786s. Less developed and illiquid markets, according to him, behave ine. He should stick to doing theory papers no one reads. It is common knowledge that there is a positive relationship between the risk and the expected return of a financial asset. Asset pricing and portfolio choice theory ebook written by kerry back.
It is an investment theory based on the idea that riskaverse investors can construct portfolios to optimize or maximize expected return based on a given level of market risk, emphasizing that risk is an inherent part of higher reward. Asset pricing and portfolio choice theory by kerry back books on. Study 29 terms money and banking flashcards quizlet. Useful as a textbook for graduate students in finance, with extensive exercises and a solutions manual available for professors, the book will also serve as an essential reference for scholars and. Fins4776fins5576 asset pricing theory course outline. Asset pricing and portfolio choice theory kerry back oxford. In the 2nd edition of asset pricing and portfolio choice theory, kerry e. This book is intended as a textbook for asset pricing theory courses at the ph.
Portfolio choicetheory of asset demand sindbad786s blog. The asset prices we discuss would include prices of bonds and stocks, interest rates, exchange rates, and derivatives of all these underlying. Application of markowitz portfolio theory by building optimal portfolio on the us stock market 77 as new information is not absorbed immediately. Evidence and theory abstract using the panel study of income dynamics, i nd that skewness in earnings growth a ects the mean and skewness in consumption growth, and this e ect is stronger for stockholders than nonstockholders. The theory that explains the individuals or the firms asset allocation decision is known as the theory of asset demand or portfolio choice. Portfolio theory modern portfolio theory originated with the work of markowitz 1952, who recognized that by combining assets that are not perfectly correlated for example, assets whose returns. Countercyclical risks and portfolio choice over the life. Portfolio theory the portfolio return is a weighted average of the individual returns. Markowitzs modern portfolio theory 1952 then optimizes based on the. It is written at an introductory level but includes detailed proofs and calculations as section appendices. The first two parts of the book explain portfolio choice and asset pricing theory in singleperiod, discretetime, and continuoustime models.
It also treats asymmetric information, production models, various proposed explanations for the equity premium puzzle, and topics important for behavioral finance. Asset pricing and portfolio choice theory ebook, 2010 worldcat. Portfolio theory is an economic theory of investor behavior. Useful as a textbook for graduate students in finance, with extensive exercises and a solutions manual available for professors, the book will also serve as an essential reference for scholars and professionals, as it includes. One objective of portfolio theory is the identification of the. K back in asset pricing and portfolio choice theory, kerry e.
A theory of how much of an asset people want to hold in their portfolio, with the amounts determined by wealth, expected returns, risk, and liquidity. The capm is still widely used in app lications su ch as e stimating the cost of. The process of combining securities in a portfolio is known as diversification. If there are arbitrage opportunities, the market is obviously not stable or e. Kerry back asset pricing solutions manual economics. Roll, richard 1976, a critique of asset pricing theorys tests. The noarbitrage assumption is thus a weak form of equilibrium or e. There are two major variables or factors that strongly influence the asset demand or portfolio choice of an individual or a firm is the rate of return and the risk level of the asset. Learn vocabulary, terms, and more with flashcards, games, and other study tools. Volatility and correlation in the pricing of equity, fx and interestrate options. Countercyclical risks and portfolio choice over the life cycle. Continuoustime portfolio choice and pricing 342 14. Kerry back asset pricing solutions manual economics job. For all the sessions students will need the class notes, the data files and a laptop with matlab.
Useful as a textbook for graduate students in finance, with extensive exercises and a solutions manual available for. A newsutility theory for inattention and delegation in. Kerry back asset pricing and portfolio choice theory. Asset pricing and portfolio choice theory this book covers the classical results on singleperiod, discretetime, and continuoustime models of portfolio choice and asset pricing. Asset pricing and portfolio choice theory second edition kerry e. Fabozzi is an adjunct professor of finance at the school of management at yale university in new haven, ct. Asset pricing and portfolio choice theory by kerry back. If t is the same for everybody all investors agree on what are the tangent weights, then t is the market portfolio m. Volatility and correlation in the pricing of equity, fx and interestrate options riccardo rebonato.
Introduction to asset pricing theory the theory of asset pricing is concerned with explaining and determining prices of. Buy asset pricing and portfolio choice theory financial management association survey and synthesis series 2 by kerry e. A newsutility theory for inattention and delegation in portfolio choice. Asset pricing and portfolio choice theory edition 1 by. It is easy to foresee this text becoming a new standard in finance phd courses as well as a valued reference for seasoned finance scholars everywhere. F asset pricing and portfolio choice theory for kindle. Sep 10, 2010 kerry back has created a masterful introduction to asset pricing and portfolio choice. Portfolio theory and asset pricing elton, edwin j on. The aim of diversification is to reduce total risk without sacrificing portfolio return. Theory of portfolio choice capital asset pricing model.
John campbell 2018 financial decisions and markets. Theory of portfolio choice capital asset pricing model capm. Useful as a textbook for graduate students in finance, with extensive exercises and a solutions manual available for professors, the book will also serve as an essential reference. This is a survey of classical intertemporal asset pricing theory a central objective of this theory is to reduce assetpricing problems to the identification of state prices, a notion of arrow 1953 from which any security has an implied value as the weighted. Financial economics asset pricing and portfolio selection. Asset pricing and portfolio choice theory second edition. Back at last offers what is at once a welcoming introduction to and a comprehensive overview of asset pricing. The investors problem is to choose the best portfolio p. Asset pricing i pricing models and derivatives course description.
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