Wang 2005, kan and zhou 2007, golosnoy and okhrin 2007. Kerry back has created a masterful introduction to asset pricing and portfolio choice. An overview of asset pricing models andreas krause university of bath school of management phone. Costis skiadas develops in depth the fundamentals of arbitrage pricing, meanvariance analysis, equilibrium pricing, and optimal consumptionportfolio choice in discrete settings, but with emphasis.
Campbell abstract this paper surveys the field of asset pricing. An alternate title might be arbitrage, optimality, and equilibrium, because the book is built around the three basic constraints on asset prices. For valuation, the focus throughout is on stochastic discount factors and. 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. Everyday low prices and free delivery on eligible orders. Errata asset pricing and portfolio choice theory second edition kerry back june 5, 2019. Arbitrage pricing theory apt is a multifactor asset pricing model based on the idea that an assets returns can be predicted using the linear relationship between the assets expected return. It covers the classical results on singleperiod, discretetime, and continuoustime models. These notes are based on asset pricing and portfolio choice theory by kerry back. The first two parts of the book explain portfolio choice and asset pricing theory in single. Portfolio choice with an unknown expected return 594 23. Harry markowitz laid down the foundation of modern portfolio management in 1952.
F asset pricing and portfolio choice theory for kindle. An empirical investigation of the capital asset pricing model. Realtime portfolio choice implications of asset pricing models. Asset pricing and portfolio choice theory second edition. Pdf download asset pricing and portfolio choice theory. The course then turns to the capital asset pricing model capm and consumptionbased asset pricing model, and develops dynamic portfolio choice problems and equilibrium asset pricing theories. This book is an introduction to the theory of portfolio choice and asset pricing in multiperiodsettings under uncertainty. Thus, throughout the paper we refer to the sharpelintnerblack model as the capm. The investors problem is to choose the best portfolio p. Here asset prices jointly satisfy the requirement that the quantities of each asset supplied and the quantities demanded must be equal at that price so called market clearing. Wachter the rst chapter \rare disasters and the term structure of interest rates o ers an explanation for the properties of the nominal term structure of interest rates and time. Pdf asset pricing and portfolio choice theory semantic scholar. Dynamic asset pricing theory provisional manuscript.
The capm builds on the model of portfolio choice developed by harry markowitz 1959. We thank professor back for his kindly and enormous support. Essays on asset pricing and portfolio choice hsinhung jerry tsai jessica a. Asset pricing theory is an advanced textbook for doctoral students and researchers that offers a modern introduction to the theoretical and methodological foundations of competitive 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 at the millennium harvards dash harvard university. Kerry back asset pricing and portfolio choice theory. It also treats asymmetric information, production models, various proposed explanations for the equity premium puzzle, and topics important for behavioral finance. In the classic world of the sharpelintnertreynor capital asset pricing model. Asset pricing and portfolio choice theory financial. 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. The emphasis is on the interplay between theory and empirical work and on the tradeoff between risk and return. Pdf introduction to asset pricing and portfolio performance.
Firstly, it serves as a guide to understanding some of the important intuitions from portfolio theory and the capital asset pricing model capm. The first two parts of the book explain portfolio choice and asset pricing theory in singleperiod, discretetime, and. This book is intended as a textbook for asset pricing theory courses at the ph. Optimal portfolio choice and the capm2 corporate finance 2 amount of risk that remains in a portfolio depends on the amount of risk that is common to the stocks need to measure amount of common risk in stocks in our portfolio. An empirical investigation of the capital asset pricing. Fins4776fins5576 asset pricing theory course outline.
By striking a balance between fundamental theories and cuttingedge research, pennacchi offers the reader a wellrounded introduction to modern asset pricing theory that does not require a high level of. Back at last offers what is at once a welcoming introduction to and a comprehensive overview of asset pricing. The legacy of modern portfolio theory it is illegal to. According to modern portfolio theory, the risk of a single asset is. The capm was developed 12 years later in articles by william sharpe, john lintner, and jan mossin. Lintner 1965 marks the birth of asset pricing theory resulting in a nobel prize for sharpe in 1990. Kerry back 2010, asset pricing and portfolio choice theory, oxford university press stephen f. The asset prices we discuss would include prices of bonds and stocks, interest rates, exchange rates, and derivatives of all these underlying. Asset pricing and portfolio choice theory by kerry back i have the book, its. Capital asset pricing model equation expected stock return is a function of market risk. And again, the mean and standard deviation of the samplebased optimal portfolio. The literature on asset pricing models and portfolio performance metrics is specifically. In markowitzs model, an investor selects a portfolio at time. Leroy and jan werner l, 2001, principles of financial economics, cambridge university press optional.
If t is the same for everybody all investors agree on what are. The best asset pricing books are in no particular order. An overview of asset pricing models university of bath. To gether mpt and asset pricing theory provide a framework to specify and measure investment risk and to develop relationships between expected asset return and risk and hence between risk and required return on an the legacy of modern portfolio theory frank j. Kerry back asset pricing solutions manual economics. For one, asset pricing models presume a theory of portfolio choice. An individual user may print out a pdf of a single chapter of a monograph in oso for personal use. Copy is not allowed without any permission from the author. Modern research seeks to understand the behavior of the stochastic discount factor sdf.
In our empirical application, we use models that combine many prominent factors from. It is written at an introductory level but includes detailed proofs and calculations as section appendices. The techniques used are called meanvariance optimization and the underlying theory is called the capital asset pricing model capm. Useful as a textbook for graduate students in finance, with extensive exercises and a solutions manual available for. Asset pricing and portfolio choice theory, 2 edition download. The capital asset pricing model was developed by the financial economist and later, nobel laureate in economics william sharpe, set out in his 1970. Back offers a concise yet comprehensive introduction to and overview. Asset pricing and portfolio choice theory by kerry back. Financial economics asset pricing and portfolio selection lecture 4 hongtao zhou. In this paper we reevaluate the role of uninsurable wage risk for peoples willingness to bear. These models are born out of modern portfolio theory, with the capital asset pricing model capm as the prototypical result. It also treats various proposed explanations for the equity premium and riskfree rate. Intended as a textbook for asset pricing theory courses at the ph. In the 2nd edition of asset pricing and portfolio choice theory, kerry e.
The elements of the course that focus on derivative pricing are based on. In practice, the choice of variables has been guided by both economic theory and. Asset pricing and portfolio choice theory this book covers the classical results on singleperiod, discretetime, and continuoustime models of portfolio choice and asset pricing. Theory of asset pricing george pennacchi part i singleperiod portfolio choice and asset pricing chapter 1expected. Assumes that the investor holds a welldiversified portfolio. Errata asset pricing and portfolio choice theory second. 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. Buy asset pricing and portfolio choice theory financial management association survey and synthesis series 2 by back, kerry e. One objective of portfolio theory is the identification of the. Introduction to asset pricing theory the theory of asset pricing is concerned with explaining and determining prices of. Fama, and french 1998 combine book value data obtained from. Although the prehistory of modern portfolio theory stretches back all the way to. 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. Asset pricing and portfolio choice theory oxford scholarship.