Productionbased asset pricing and the link between stock returns and economic fluctuations. Darrell duffie, dynamic asset pricing theory, princeton university press, 2001. Financial markets and the real economy john cochrane. It compares the studied asset to all other assets in the market in terms of the expected return and expected risk. Content made available through this website is for informational purposes only and should not be considered financial or legal advice. Asset pricing wikibooks, open books for an open world. You can learn more about the class and sign up for it on the coursera website here. You should probably have both on your bookshelf if youre. Recommended these are books worth buying independent of your enrollment in the course if you are planning to do serious finance research.
Colacito, r, and m croce 2011, risks for the longrun and the real exchange rate, journal of political economy, 119, 153181. This book owes an enormous intellectual debt to lars hansen and gene fama. Cochraneproductionbased asset pricing and the link between stock returns and economic fluctuations. Costis skiadas develops in depth the fundamentals of arbitrage pricing, meanvariance analysis, equilibrium pricing, and optimal consumptionportfolio choice in discrete settings, but with emphasis. Samuelson award for scholarly writing on lifelong financial security, john cochranes asset pricing now appears in a revised edition that unifies and brings the science of asset pricing up to date for advanced students and professionals. It then determines a fair price by penalizing the asset for each extra unit of risk. Cochrane traces the pricing of all assets back to a single ideaprice equals expected discounted. Written to be a summary for academics and professionals as well as a textbook, this book condenses and advances recent scholarship in. The book has room for improvement, and i believe back is working on a 2nd edition. Cochrane, using production based asset pricing to explain the behavior of stock returns over the business cycle, nber working paper no. For debt, asset pricing is relatively simple, as cash flows to the owner are contractually fixed. You can find lecture notes, class notes, readings, and problem sets at the. Asset pricing theory all stems from one simple concept, derived in the first page of the first chapter of this book. Asset pricing, economic fluctuations and growth discount rate variation is the central organizing question of current asset pricing research.
This online course is a wonderful companion to the classic textbook, asset pricing, by you, professor cochrane. Its much simpler that way, and continuous time is a standard part of a finance phds toolkit. Samuelson award for scholarly writing on lifelong financial security, john cochranes asset pricing now. Explaining the poor performance of consumptionbased asset pricing models. Economic perspectives, federal reserve bank of chicago. According to his own words, the organizing principle of the book is that everything can be traced back to specializations of a single equation.
Cochrane traces the pricing of all assets back to a single ideaprice equals expected discounted payoffthat captures the macroeconomic risks underlying each securitys value. Cochrane s recent publications include the book asset pricing and articles on dynamics in stock and bond markets, the volatility of exchange rates, the term structure of interest rates, the returns to venture capital, liquidity premiums in stock prices, the relation between stock prices and business cycles, and option pricing when investors. Asset pricing theory all stems from one simple concept, derived in the. But, currently, there is no other text better than back. Chapter pdfs available here comments presented at the hoover conference by the same name, may 21, 2015. I think of the two books by cochrane and campbell as complements not competitors. Asset pricing, economic fluctuations and growth, monetary economics this paper studies time variation in expected excess bond returns. Find, read and cite all the research you need on researchgate.
University of delaware alfred lerner college of business. However, you may use a formula sheet this will be discussed in more detail in the first class. This otherwise comprehensive book doesnt have any option pricing in it, though blackscholes is a cornerstone of finance. Cochrane traces the pricing of all assets back to a single idea price equals expected discounted payoff that captures the macroeconomic risks underlying each securitys value. In revising asset pricing and the online versions, i have moved entirely to continuous time rather than lognormal approximations. Doesitdescribethewaytheworld does work,orthewaytheworld should work. Leroy and jan werner, principles of financial economics. Asset pricing cochrane is the author of asset pricing, a widely used textbook in graduate courses on asset pricing. There are several textbooks that deal with asset allocation and asset pricing. In this book, uncertainty is assumed in both how an asset would pay in the future. This page is devoted to the book asset pricing, and the corresponding online class.
Duffies dynamic asset pricing theory is not the best book to start. Transversality and the stochastic nature of cash flows. Cochrane traces the pricing of all assets back to a single idea. Part 1 and 2 will be completely separate coursera classes, so take what you want. The course will be primarily based on cochrane 2009. Cochrane is the author of asset pricing, a widely used textbook in graduate courses on asset pricing. Profitability and investment factors for uk asset pricing. Samuelson award for scholarly writing on lifelong financial security, john cochranes. I disclaim any and all liability in the event any information provided result in any losses. I thank john campbell, george constantnides, doug diamond, gene fama, zhiguo he, bryan kelly, juhani linnanmaa, toby moskowitz, lubos pastor, monika piazzesi, amit seru, luis viceira, lu zhang, and guofu zhou for very helpful. Cochrane traces the pricing of all assets back to a single ideaprice equals expected discounted payoffthat captures the macro. Test of profitability and investment factors contribution to asset pricing models.
Samuelson award for scholarly writing on lifelong financial security, john cochrane s asset pricing now appears in a revised edition that unifies and brings the science of asset pricing up to date for advanced students and professionals. Asset pricing department of banking and financial management. The rest is elaboration, special cases, and a closet full of tricks that make the central equation useful for one or another application. Cochrane traces the pricing of all assets back to a single idea price equals expected discounted payoff that captures the macro. The order tells you which books we will use the most. University of chicago booth school of business, and nber. Cochrane, j h 2005, asset pricing, revised edition, princeton university, princeton nj. By using a single, stochastic discount factor rather than a separate set of tricks for each asset class, cochrane builds a unified account of modern asset pricing. Dd e c refer to the books danthine and donaldson and cochrane. Asset pricing theory shares the positive versus normative tension presentintherestofeconomics. There are two polar approaches to this elaboration.
The new and improved online version of my phd class asset pricing part 1 will open for business january 18. 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. Financial engineering books, international association. While both models include profitability and investment factors for prior development of this approach see. Asset pricing, economic fluctuations and growth i survey work on the intersection between macroeconomics and finance. My asset pricing webpage has links to the class, book, and many other useful materials. A course in asset pricing, princeton university press ca. Asset pricing theory tries to understand the prices or values of claims to. A crosssectional test of an investmentbased asset pricing model. Asset pricing theory all stems from one simple concept. Financial consulting asset pricing new york, chicago. Strong economy, strong currency vox, cepr policy portal. This is the source of the graph and tables for the production section. It is the most uptodate text on the canonical asset pricing theory.