Financial markets theory. Equilibrium, efficiency and information (Q5917431)

This book regards on one side the theoretical debate about financial markets, agent's behavior under risk, and on the other side the comparision of theoretical results with the empirical evidence. It covers a wide spectrum of topics as classical asset pricing theory and heretics. It does not treat mathematical financial topics as option pricing, term structure, interest rate derivates, futures, etc. It is organized in 11 chapters. After the prerequisites in chapter 1, chapter 2-7 and chapter 10 regard the classical asset pricing model theory comprehensive of corporate finance and models with heterogeneous-private information. The chapters 8, 9, and 11 analyses the assumptions made in previous chapters to discussing their relevance. Chapter 1 (Prerequisites) describes choices under certainty, the general equilibrium theory, and Pareto optimality. Chapter 2 (Choices under risk) regards the expected utility theory, risk aversion, the portfolio problem, insurance demand, and prudence. Chapter 3 (Stochastic dominance, mutual fund seperation and portfolio frontier) presents the stochastic dominance, the mean variance analysis, portfolio frontier (risky and riskfree assets), and mutual fund seperation. In Chapter 4 (General equilibrium theory and risk exchange) the author addresses risk sharing and Pareto optimality, asset markets, intertemporal consumption, and the fundamental asset pricing theorem. In Chapter 5 (Risk premium: Capital Asset Pricing Model and Asset Pricing Theory) the Capital Asset Pricing Model and the arbitrage pricing theory are introduced theoretically and are discussed empirically. Chapter 6 (Multiperiod market models) extends equilibrium and no arbitrage analysis to a multiperiod setting. Efficiency of the equilibrium allocation and the fundamental asset pricing theorem are investigated. Asset time series implications derived are compared with empirical evidence. Further, evidence on return autocorrelation, the equilibrium premium puzzle and the risk free puzzle are regarded. Chapter 7 (Information and financial markets) analyses financial markets assuming heterogeneous-private information. It regards how prices transmit and aggregate private information providing a microfoundation to the effizient market theory. Chapter 8 (Uncertainty, rationality, heterogeneity) deals on uncertainty, risky and probability, the expected utility theory, heterogeneous agents and substancial rationality, bounded rationality, incomplete information and learning, imperfect and imcomplete markets. Chapter 9 (Financial markets microstructure) is devoted to financial markets. It regards the role of information under non-perfect competition, order driven and quote driven markets and ends with multiperiod market models. Chapter 10 (Corporate finance) describes the Modigliani-Miller theorem, asymmetric information and agency models. Chapter 11 (Intermediation and regulation) regards institutional investors, intermediation and financial markets, market design and market abuse (insider trading and market manipulation).