Financial economics 63262 224756134 2008-07-10T08:07:31Z Fintor 69488 /* External links and references */ London School of Economics '''Financial economics''' is the branch of [[economics]] concerned with "the allocation and deployment of economic resources, both spatially and across time, in an uncertain environment" [http://nobelprize.org/nobel_prizes/economics/laureates/1997/merton-lecture.pdf]. It is additionally characterised by its "concentration on monetary activities", in which "money of one type or another is likely to appear on ''both sides'' of a trade" [http://www.stanford.edu/~wfsharpe/mia/int/mia_int2.htm]. The questions within Financial economics are typically framed in terms of "time, uncertainty, options and information" [http://www.stanford.edu/~wfsharpe/mia/int/mia_int2.htm]. * Time: money now is traded for money in the future. * Uncertainty (or [[risk]]): The amount of money to be transferred in the future is uncertain. * [[Option (finance)|option]]s: one party to the transaction can make a decision at a later time that will affect subsequent transfers of money. * [[Perfect information|Information]]: knowledge of the future can reduce, or possibly eliminate, the uncertainty associated with [[future monetary value]] (FMV). ==Subject matter== Given its scope, as above, financial economics tends to deal with the workings of [[financial markets]], such as the [[stock market]], and the [[finance|financing]] of [[corporation|companies]], and includes the following subject areas: Budgeting, saving, investing, borrowing, lending, insuring, hedging, diversifying, and asset management. Because the future is never known with certainty, a central concern of financial economics is the impact of uncertainty on resource allocation. Financial economics thus attempts to answer questions such as: * How are the prices of financial [[asset]]s determined ([[stock]]s, [[Bond (finance)|bonds]], currencies, and commodities)? * What are the effects of a company choosing different methods of financing its operations, such as issuing shares or [[Debt|borrowing]]? * What portfolio of assets should an [[Investment|investor]] hold in order to best meet his/her objectives? ==Assumptions== Financial economics is based on many [[assumptions]] - chief amongst these, that financial decision makers are rational (see [[Homo economicus]]; [[Efficient market hypothesis]]). However, recently, researchers in [[Experimental economics]] and [[Experimental finance]] have challenged this assumption [[empirical]]ly. Further, these assumptions are challenged - [[theoretical]]ly - by [[Behavioral finance]], a discipline primarily concerned with the rationality, or lack thereof, of economic agents. Other common assumptions include market prices following a [[random walk]], or asset returns being [[Normal distribution|normally distributed]]. Empirical evidence suggests that these assumptions may not hold, and in practice, traders and analysts, and particularly [[financial risk management|risk managers]], frequently modify the "standard models". == Important concepts == *[[Risk-free interest rate]] *[[Time value of money]] *[[Fisher separation theorem]] *[[Modigliani-Miller theorem]] *[[Arbitrage]] *[[Rational pricing]] *[[Efficient market theory]] *[[Modern portfolio theory]] *[[Yield curve]] *[[Homo economicus]] *[[Arrow-Debreu model]] ==Finance journals== *[[Journal of Finance]] *[[Review of Financial Studies]] *[[Journal of Financial Economics]] *[[Econometrica]] *[[Financial Analysts Journal]] *[[Journal of Investment Management]] == See also == *[[Finance]] *[[Value investing]] *[[Financial mathematics]] *[[Financial engineering]] *[[Financialization]] *[[Mathematical economics]] *[[Model (economics)]] *[[Experimental economics]] *[[Experimental finance]] *[[Behavioral finance]] *[[Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel|Bank of Sweden Prize in Economic Sciences]] *lists **[[list of economics topics|List of Economics Topics]] **[[list of finance topics|List of Finance Topics]] **[[list of economists|List of Economists]] ==External links and references == '''Theory''' * [http://www.stanford.edu/~wfsharpe/mia/int/mia_int2.htm Macro-Investment Analysis], [[William Forsyth Sharpe|Professor William Sharpe]], [[Stanford Graduate School of Business]] *[http://fmg.lse.ac.uk/~antonio/files/fin_eco.pdf Lecture Notes in Financial Economics], Antonio Mele, [[London School of Economics]] * [http://www.in-the-money.com/artandpap/I%20Present%20Value.doc Great Moments in Financial Economics I], [http://www.in-the-money.com/artandpap/II%20Modigliani-Miller%20Theorem.doc II], [http://www.in-the-money.com/artandpap/III%20Short-Sales%20and%20Stock%20Prices.doc III]; [http://www.in-the-money.com/artandpap/IV%20Fundamental%20Theorem%20-%20Part%20I.doc IVa]; [http://www.in-the-money.com/artandpap/IV%20Fundamental%20Theorem%20-%20Part%20II.doc IVb]. Prof. [[Mark Rubinstein]], [[Haas School of Business]] *[http://www.ulb.ac.be/cours/solvay/farber/PhD.htm Microfoundations of Financial Economics] Prof. André Farber [[Solvay Business School]] *[http://ideas.repec.org/b/eee/finhes/2.html#related Handbook of the Economics of Finance], G.M. Constantinides, M. Harris, R. M. Stulz * [http://www.sciencedirect.com/science?_ob=RefWorkIndexURL&_idxType=SC&_cdi=23486&_refWorkId=21&_explode=151000131,151000133&_alpha=&_acct=C000050221&_version=1&_userid=10&md5=f2c773b745753022e1cccc9a38d83508&refID=151000133#151000133 Financial economics]'', [[International Encyclopedia of the Social & Behavioral Sciences]]'', Oxford: Elsevier. 2001. *[http://www.dictionaryofeconomics.com/articles_by_topic?topicid=G Financial economics topics], [[The New Palgrave Dictionary of Economics, 2nd Edition|The New Palgrave Dictionary of Economics]] *[http://viking.som.yale.edu/will/web_pages/will/finman540/classnotes/notes.html An introduction to investment theory], Prof. William Goetzmann, [[Yale School of Management]] '''Context and history''' *[http://cepa.newschool.edu/het/schools/finance.htm Finance Theory], The History of Economic Thought Website, [[The New School]] *[http://www.finance-and-physics.org/Library/Articles3/scienceandfinance/science.htm The Scientific Evolution of Finance] Prof. Don Chance, Prof. Pamela Peterson *[http://education.riskmetrics.com/wiki/index.php?title=Great_Ideas_in_Finance Great Ideas in Finance], riskmetrics.com * [http://roundtable.informs.org/public-access/min061a.htm A Short History of Investment Forecasting], Professor Michael Phillips, [[California State University, Northridge]] *[http://campus.murraystate.edu/academic/faculty/larry.guin/FinancialHistory.htm Pioneers of Finance], Prof. Larry Guin, [[Murray State University]] *[http://www.fame.ch/library/EN/RP_Bernstein.pdf How Modern is Modern Portfolio Theory?], [[Peter L. Bernstein]] '''Links and portals''' *[http://www.helsinki.fi/WebEc/webecg.html Financial Economics Links on WebEc] *[http://www.inomics.com/cgi/econdir?path=Science/Social_Sciences/Economics/Financial_Economics Financial Economics Links on inomics] *[http://rfe.org/showCat.php?cat_id=56 Financial Economics Links on RFE] *[http://www.ssrn.com/fen/index.html SSRN Financial Economics Network] '''Education''' [[Master's degree]]s in financial economics are often a joint offering by the [[business school]] and the economics department. <!-- alphabetical by university --> {| |- | valign="top" | *[http://www.cardiff.ac.uk/carbs/programmes/masters/finecon.html MSc in Financial Economics], [[Cardiff University]] *[http://www.city.ac.uk/economics/finance/ MSc Financial Economics], [[City University, London]] *[http://www.essex.ac.uk/economics/prospective/pg/pg-sch-msc-fineconomics.asp MSc Financial Economics], [[University of Essex]] *[http://www.sobe.ex.ac.uk/postgraduate/msc_fe/ MSc Financial Economics], [[University of Exeter]] *[http://www.gla.ac.uk/departments/economicandfinancialstudies/postgraduatetaughtprogrammes/mscfinancialeconomics/ MSc Financial Economics] [[University of Glasgow]] * [http://www.uj.ac.za/economics/FieldsofStudy/Postgraduate/Masters/MComFinancialEconomics/tabid/12745/Default.aspx M.Com. Financial Economics], [[University of Johannesburg]] *[http://www.kingston.ac.uk/pgfinancialeconomics/ M.A. Financial Economics], [[Kingston University]] *[http://www.le.ac.uk/ec/postgraduate/taught/mscfinancialeconomics.html MSc Financial Economics], [[University of Leicester]] *[http://www.econ.kuleuven.be/LSBE/masters/fin_economics.htm Master of Financial Economics], [[Catholic University of Leuven]] *[http://www.lse.ac.uk/resources/graduateProspectus2008/taughtProgrammes/MScFinanceAndEconomics.htm MSc Finance and Economics], [[London School of Economics]] | valign="top" | *[http://www.econ.qmul.ac.uk/postgraduate/mscfe.htm M.Sc. Financial Economics], [[University of London]]: [[Queen Mary, University of London|Queen Mary]] *[http://www.cefims.ac.uk/cgi-bin/programmes.cgi?func=programme&id=5 M.Sc. Financial Economics], [[University of London]]: [[School of Oriental and African Studies]] *[http://www.lboro.ac.uk/departments/ec/Postgraduate/Courses/MSc%20in%20Economics%20and%20Finance%20new.htm MSc in Financial Economics], [[Loughborough University]] *[http://www.bi.no/Content/Study____56463.aspx MSc in Financial Economics], [[Norwegian School of Management]] *[http://www.nottingham.ac.uk/economics/ps/postgraduate/maefe.html MSc in Applied Economics and Financial Economics], [[University of Nottingham]] * [http://spears.okstate.edu/grad/msqfe/content/index.html M.S. Quantitative Financial Economics], [[William S. Spears School of Business]], [[Oklahoma State University]] * [http://www.sbs.ox.ac.uk/MFE/ M.Sc. Financial Economics], [[Said Business School]], [[Oxford University]] * [http://www.rotman.utoronto.ca/mfe/ Masters in Financial Economics], [[Rotman School of Management]], [[University of Toronto]] *[http://www.sheffield.ac.uk/postgraduate/taught/courses/sscience/economics/financial.html Financial Economics - MSc], [[University of Sheffield]] |} {{finance-footer}} [[Category:Financial economics|*]] [[it:Economia finanziaria]] [[sv:Finansiell ekonomi]]