Winner of the prestigious Paul A. 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. Cochrane traces the pricing of all assets back to a single idea--price equals expected discounted payoff--that captures the macro-economic risks underlying each security's value. 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. He presents applications to stocks, bonds, and options. Each model--consumption based, CAPM, multifactor, term structure, and option pricing--is derived as a different specification of the discounted factor.
 The discount factor framework also leads to a state-space geometry for mean-variance frontiers and asset pricing models. It puts payoffs in different states of nature on the axes rather than mean and variance of return, leading to a new and conveniently linear geometrical representation of asset pricing ideas.
 Cochrane approaches empirical work with the Generalized Method of Moments, which studies sample average prices and discounted payoffs to determine whether price does equal expected discounted payoff. He translates between the discount factor, GMM, and state-space language and the beta, mean-variance, and regression language common in empirical work and earlier theory.
 The book also includes a review of recent empirical work on return predictability, value and other puzzles in the cross section, and equity premium puzzles and their resolution. Written to be a summary for academics and professionals as well as a textbook, this book condenses and advances recent scholarship in financial economics.

Asset Pricing: Revised Edition

Business & Money

Cochrane, John H.

Economics

Princeton University Press

In the fall of 2008, fifteen of the world's leading economists--representing the broadest spectrum of economic opinion--gathered at New Hampshire's Squam Lake. Their goal: the mapping of a long-term plan for financial regulation reform.
 The Squam Lake Report distills the wealth of insights from the ongoing collaboration that began at these meetings and provides a revelatory, unified, and coherent voice for fixing our troubled and damaged financial markets. As an alternative to the patchwork solutions and ideologically charged proposals that have dominated other discussions, the Squam Lake group sets forth a clear nonpartisan plan of action to transform the regulation of financial markets--not just for the current climate--but for generations to come.
 Arguing that there has been a conflict between financial institutions and society, these diverse experts present sound and transparent prescriptions to reduce this divide. They look at the critical holes in the existing regulatory framework for handling complex financial institutions, retirement savings, and credit default swaps. They offer ideas for new financial instruments designed to recapitalize banks without burdening taxpayers. To lower the risk that large banks will fail, the authors call for higher capital requirements as well as a systemic regulator who is part of the central bank. They collectively analyze where the financial system has failed, and how these weak points should be overhauled.
 Combining an immense depth of academic, private sector, and public policy experience, The Squam Lake Report contains urgent recommendations that will positively influence everyone's financial well-being--all who care about the world's economic health need to pay attention.

The Squam Lake Report: Fixing the Financial System

Duffie, Darrell

Mishkin, Frederic S.

Shiller, Robert J.

Campbell, John Y.

Shin, Hyun Song

Rajan, Raghuram G.

Stulz, René M.

French, Kenneth R.

Baily, Martin N.

Diamond, Douglas W.

Kashyap, Anil K.

Scharfstein, David S.

Slaughter, Matthew J.

Stein, Jeremy C.

Review\n“A treatise on the scale of Keynes, Friedman, and Schwartz, The Fiscal Theory of the Price Level now joins the monuments of monetary economics that every serious researcher in the field must know and consider.”―Darrell Duffie, Stanford University\n“Policies that set taxes, spending, debt, and interest rates interact to control inflation. Though it’s labelled the fiscal theory, the approach laid out in Cochrane’s book is not one among many theories of the price level; it is the only theory that confronts all these aspects of monetary and fiscal policy jointly. He develops intuition with simple examples, considers a wide range of realistic complications to the theory, interprets empirical observations, and explores the relevant history of thought. Plus, it’s fun to read.”―Christopher A. Sims, Nobel Laureate in Economics\n“This book is the product of years of Cochrane’s groundbreaking research on interrelated topics central to modern macroeconomics and finance. In addition to providing stern but fair criticisms of a vast technical literature, Cochrane shows by example how enlightening good data, econometrics, and economic theory can be when in the right hands.”―Thomas J. Sargent, Nobel Laureate in Economics\n“This book provides an exhaustive account of the fiscal theory of the price level and its implications by one of the leading experts on the theory. John Cochrane has developed the theory by incorporating it into more empirically realistic and compelling frameworks, has worked out testable implications to take the theory to the data, and has patiently answered its critics and skeptics. This book couldn’t have appeared at a better time.”―Stephanie Schmitt Grohé, Columbia University\n“This is an important book, and its importance will only grow in coming decades. The fiscal theory is the freshest and most relevant development in monetary economics since Sargent and Wallace in the early 1980s, and this book offers a much-needed alternative to the unquestioned dominance of the New Keynesian paradigm.”―Eric M. Leeper, University of Virginia\n“This brilliant, provocative book explains in a clear, careful way the elements of the fiscal theory of the price level approach to macroeconomics. Using modern finance theory, modern macroeconomics, and historical narratives, John Cochrane makes a convincing case that fiscal policy, not just monetary policy, is a key underpinning for understanding inflation.”―Michael D. Bordo, Rutgers University\nA comprehensive account of how government deficits and debt drive inflation\nWhere do inflation and deflation ultimately come from? The fiscal theory of the price level offers a simple answer: Prices adjust so that the real value of government debt equals the present value of taxes less spending. Inflation breaks out when people don’t expect the government to fully repay its debts. The fiscal theory is well suited to today’s economy: Financial innovation undermines money demand, and central banks don’t control the money supply or aggressively change interest rates, invalidating classic theories, while large debts and deficits threaten inflation and constrain monetary policy. This book presents a comprehensive account of this important theory from one of its leading developers and advocates.\nJohn Cochrane aims to make fiscal theory useful as a conceptual framework and modeling tool, and for analyzing history and policy. He merges fiscal theory with standard models in which central banks set interest rates, giving a novel account of monetary policy. He generalizes the theory to explain data and make realistic predictions. For example, inflation decreases in recessions despite deficits because discount rates fall, raising the value of debt; specifying that governments promise to partially repay debt avoids classic puzzles and allows the theory to apply at all times, not just during periods of high inflation. Cochrane offers an extensive rethinking of monetary doctrines and

The Fiscal Theory of the Price Level

This book provides a state-of-the-art review of a major recent technology which has now reached a level of maturity. The editors have pioneered the development and application of these techniques and technologies, and the chapter authors are leading practitioners in their subject areas. The volume encompasses methods and instrumentation across a range of applications. It is directed at researchers and professionals in vibrational spectroscopy, analytical chemistry, materials science, biomedicine, food science and combinatorial chemistry.

What are the real, macroeconomic risks that drive asset prices? This question is centrally important to macroeconomics. Where better to learn about the risks of recessions and depressions than by understanding the prices of assets such as stocks that carry macroeconomic risks? The question is also at the core of finance. For example, finance has long wondered if asset prices are "rational" or not. The only meaning of that term is whether asset prices are properly connected to macroeconomic risks. Financial Markets and the Real Economy reviews the current academic literature on the macroeconomics of finance. It starts by collecting the important facts such as the equity premium, size and value effects, and the predictability of returns. It then reviews the equity premium puzzle, which is the most basic challenge to the connection between asset prices and macroeconomics. Next, it surveys the current state of consumption-based models, and some of their surprising recent successes. It covers production and general-equilibrium models that tie asset returns to more cyclically important output and investment. Finally, it surveys the potential importance of labor income and idiosyncratic risk in understanding asset markets. This is the most current and comprehensive review on the subject and will be of interest to both macroeconomists and financial economists. 1. Introduction; 2. Facts: Time-Variation and Business Cycle Correlation of Expected Returns; 3. Equity Premium; 4. Consumption Models; 5. Production, Investment and General Equilibrium; 6. Labor Income and Idiosyncratic Risk; 7. Challenges for the Future; References

Financial Markets and the Real Economy (Foundations and Trends(r) in Finance)

Now Publishers

ASSET PRICING

Investing

New Age International Publisher

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