Referee Finance

Home of the Financial Intelligence Lab

  • Increase font size
  • Default font size
  • Decrease font size
Book reviews
In this section, reports are reviews of books in finance, economics, statistics, mathematics, computer science, programming, psychology, financial history etc.. which are relevant to researchers and practitioners in finance.

A Failure of Capitalism

E-mail Print PDF

Nobel Laureate Robert Solow from MIT reviews A Failure of Capitalism: The Crisis of '08 and the Descent into Depression by Richard Posner  :click here

This review is also a commentary on the financial crisis and its origin. Robert Solow pinpoints the excess leverage and the excess risk-taking. Robert Solow concludes:

"The problem is rather that Panglossian ideas about "free markets" encouraged, on one hand, lax regulation, or no regulation, of a potentially unstable financial apparatus and, on the other, the elaboration of compensation mechanisms that positively encouraged risk-taking and short-term opportunism. When the environment was right, as it eventually would be, the disaster hit."

 

The Gold Standard and the Great Depression

E-mail Print PDF

A review of Gold Fetters: The Gold Standard and the Great Depression  :click here

 

Prof DeLong's Book Reviews

E-mail Print PDF

Prof Brad Delong from Berkeley has posted some of his book reviews  :click here

 

New Economist's Book Reviews

E-mail Print PDF

The New Economist has posted some of his book reviews  :click here

 

Capital Ideas Evolving (Bernstein)

E-mail Print PDF

This book by Peter L. Bernstein is the sequel of his masterpiece Capital Ideas: The Remarkable Origins of Modern Wall Street.The author discusses the applications of the Capital Ideas and their evolutions:

  • Markowitz’s portfolio selection,
  • Modigliani and Miller’s irrelevance theorem,
  • the Efficient Market Hypothesis,
  • the Capital Asset Pricing Model (CAPM) and
  • Black-Scholes-Merton’s option pricing model.

The book is divided into four parts:

  • behavorial finance,
  • the academics (Samuelson, Merton, Lo, Shiller, Sharpe, Markowitz and Scholes),
  • the practitioners (BGI, Yale Endowment Fund, the evolution of CAPM,  Bill Gross and portable alpha, Leibowitz, Litterman at GSAM),
  • the future of capital ideas.

The chapters on BGI, Yale and GSAM are the most interesting for academics and practitioners alike since they are putting the finance theory into practice. The chapters on the academics remain at the level of academic problems to solve, but that will lead innovation in the next ten years. These academics are however involved in real applications (developing new derivatives, running hedge funds.). The discussion with Scholes on his approach for managing his hedge fund (risk transfer and not alpha seeking) is also interesting.

Because the field is still evolving, the book’s narrative is not as nice as in the first Capital Ideas but is still worth reading.

 Peter Bernstein, 2007, Capital Ideas Evolving, John Wiley & Sons.

 



Newsflash

You can follow us on Twitter  @fintlab and facebook