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Handbook of the Economics of Finance

Book Description

The 12 articles in this second of two parts condense recent advances on investment vehicles, performance measurement and evaluation, and risk management into a coherent springboard for future research.  Written by world leaders in asset pricing research, they present scholarship about the 2008 financial crisis in contexts that highlight both continuity and divergence in research.  For those who seek authoritative perspectives and important details, this volume shows how the boundaries of asset pricing have expanded and at the same time have grown sharper and more inclusive.

  • Offers analyses by top scholars of recent asset pricing scholarship
  • Explains how the 2008 financial crises affected theoretical and empirical research
  • Covers core and newly developing fields

Table of Contents

  1. Cover image
  2. Title page
  3. Table of Contents
  4. Copyright
  5. Introduction to the Series
  6. Preface
  7. VOLUME 2B Financial Markets and Asset Pricing
    1. Chapter 12. Advances in Consumption-Based Asset Pricing: Empirical Tests
      1. 1 Introduction
      2. 2 Consumption-Based Models: Notation and Background
      3. 3 GMM and Consumption-Based Models
      4. 4 Euler Equation Errors and Consumption-Based Models
      5. 5 Scaled Consumption-Based Models
      6. 6 Asset Pricing with Recursive Preferences
      7. 7 Stochastic Consumption Volatility
      8. 8 Asset Pricing with Habits
      9. 9 Asset Pricing with Heterogeneous Consumers and Limited Stock Market Participation
      10. 10 Conclusion
      11. References
    2. Chapter 13. Bond Pricing and the Macroeconomy
      1. 1 Introduction
      2. 2 A Factor Model
      3. 3 No-Arbitrage Restrictions
      4. 4 The Variation of Yields with the Macroeconomy: US Evidence
      5. 5 Modeling Risk Premia
      6. 6 New Keynesian Models
      7. 7 Concluding Comments
      8. References
    3. Chapter 14. Investment Performance: A Review and Synthesis
      1. 1 Introduction
      2. 2 The Stochastic Discount Factor (SDF) Framework
      3. 3 Performance Measures
      4. 4 Implementation Issues and Empirical Examples
      5. 5 Fund Managers’ Incentives and Investor Behavior
      6. 6 Conclusions
      7. References
    4. Chapter 15. Mutual Funds
      1. 1 Introduction
      2. 2 Issues with Open-End Funds
      3. 3 Closed-End Funds
      4. 4 Exchange-Traded Funds (ETFs)
      5. 5 Conclusion
      6. References
    5. Chapter 16. Hedge Funds
      1. 1 The Hedge Fund Business Model—A Historical Perspective
      2. 2 Empirical Evidence of Hedge Fund Performance
      3. 3 The Risk in Hedge Fund Strategies
      4. 4 Where Do Investors Go From Here?
      5. 4.2 Risk Management and a Tale of Two Risks
      6. References
    6. Chapter 17. Financial Risk Measurement for Financial Risk Management
      1. 1 Introduction
      2. 2 Conditional Portfolio-Level Risk Analysis
      3. 3 Conditional Asset-Level Risk Analysis
      4. 4 Conditioning on Macroeconomic Fundamentals
      5. 5 Concluding Remarks
      6. References
    7. Chapter 18. Bubbles, Financial Crises, and Systemic Risk
      1. 1 Introduction
      2. 2 A Brief Historical Overview of Bubbles and Crises
      3. 3 Bubbles
      4. 4 Crises
      5. 5 Measuring Systemic Risk
      6. 6 Conclusion
      7. References
    8. Chapter 19. Market Liquidity—Theory and Empirical Evidence
      1. 1 Introduction
      2. 2 Theory
      3. 3 Empirical Evidence
      4. 4 Conclusion
      5. References
    9. Chapter 20. Credit Derivatives
      1. 1 Introduction
      2. 2 Risk-Neutral Default Probability Estimates
      3. 3 Physical Default Probability Estimates
      4. 4 Credit Default Swaps
      5. 5 Collateralized Debt Obligations
      6. 6 Credit Derivatives and the Crisis
      7. 7 Conclusions
      8. References
    10. Chapter 21. Household Finance: An Emerging Field
      1. 1 The Rise of Household Finance
      2. 2 Facts About Household Assets and Liabilities
      3. 3 Household Risk Preferences and Beliefs: What Do We Know?
      4. 4 Household Portfolio Decisions, from Normative Models to Observed Behavior
      5. 5 Household Borrowing Decisions
      6. 6 Conclusion
      7. References
    11. Chapter 22. The Behavior of Individual Investors
      1. 1 The Performance of Individual Investors
      2. 2 Why do Individual Investors Underperform?
      3. 3 The Disposition Effect: Selling Winners and Holding Losers
      4. 4 Reinforcement Learning
      5. 5 Attention: Chasing the Action
      6. 6 Failure to Diversify
      7. 7 Are Individual Investors Contrarians?
      8. 8 Conclusion
      9. References
    12. Chapter 23. Risk Pricing over Alternative Investment Horizons
      1. 1 Introduction
      2. 2 Stochastic Discount Factor Dynamics
      3. 3 Cash-Flow Pricing
      4. 4 Market Restrictions
      5. 5 Conclusions
      6. References
    13. Index