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Financ Mark Portf Manag (2016) 30:367369 DOI 10.1007/s11408-016-0270-z
BOOK REVIEW
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Web End = Claus Munk: Financial Asset Pricing Theory
Oxford University Press, 2013, 600 pages, approx. 75
Igor Pozdeev1
Published online: 20 July 2016 Swiss Society for Financial Market Research 2016
Asset pricing, arguably the very essence of academic nance, emerged rather late as a separate eld. Results documented by many researchers, including Markowitz, Sharpe, Lintner and Mossin, Black and Scholes, and Fama and French, were long treated as distinct phenomena and referenced in books on investment decision theory, corporate nance, and derivatives pricing. There was no unied framework until the stochastic discount factor (SDF) was introduced and put into the basic relation price equals discounted payoff. Asset pricing brought utility theory under the same roof with the many pricing approaches developed earlier. Because of its recent emergence and somewhat technical and abstract content, the eld has seen only a few books, the most prominent being Cochrane (2001) and Back (2010). These books target Ph.D. students and academics and differ in the rigor of mathematical apparatus and coverage of empirical methods. Munk (2013), with elaborate derivations, extensive treatment of continuous-time models, and the lack of empirical methods overview, is more similar to Back, but caters to a broader audience including master-level students and practitioners, discusses certain neglected topics, such as nominal versus real prices and the existence of a representative investor, and is denitely a valuable addition to the universe of texts on asset pricing.
Munk introduces...