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Asset Pricing Hardcover – January 23, 2005

ISBN-13: 978-0691121376 ISBN-10: 0691121370 Edition: Revised

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Asset Pricing + The Econometrics of Financial Markets + Dynamic Asset Pricing Theory, Third Edition.
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Product Details

  • Hardcover: 568 pages
  • Publisher: Princeton University Press; Revised edition (January 23, 2005)
  • Language: English
  • ISBN-10: 0691121370
  • ISBN-13: 978-0691121376
  • Product Dimensions: 9.2 x 6.5 x 1.6 inches
  • Shipping Weight: 2 pounds (View shipping rates and policies)
  • Average Customer Review: 3.7 out of 5 stars  See all reviews (41 customer reviews)
  • Amazon Best Sellers Rank: #158,883 in Books (See Top 100 in Books)

Editorial Reviews

Review


Co-Winner of the 2001 Paul A. Samuelson award


"This is a brilliant and useful book, well-deserving of the TIAA-CREF Samuelson Award. . . . The clever intuition and informal writing style make it a joy to read. Like a star athlete does with the sport, Cochrane makes it look easier than it really is."--Journal of Economic Literature

Review

This is an impressive treatise of very high quality. It is a serious scholarly monograph, of interest to those who are working to advance financial theory, and it can also serve as a textbook in an advanced finance course. It is thoughtful, inductive, and comprehensive. (Robert J. Shiller, author of Irrational Exuberance) --This text refers to an alternate Hardcover edition.

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Customer Reviews

It is a very useful book for the finance academicians.
Jian Du
I really don't understand why this book is popular or even who the intended audience is.
Alan C. Orrick
Cochrane sketches out proofs for most of theorems and corollaries.
Phil Maurice

Most Helpful Customer Reviews

50 of 52 people found the following review helpful By Craig W. French on November 17, 2005
Format: Hardcover Verified Purchase
Given the innumerable finance books available, I find myself constantly trying to separate the wheat from the chaff (and, sadly, finding a whole lot more of the latter than the former). John Cochrane's Asset Pricing (2001, Princeton University Press) is not only wheat, but also perhaps the most finely milled flour baked to perfection into one's favorite dessert, served with a chilled glass of Château d'Yquem. Cochrane identifies his target audience as "economics and finance Ph.D. students, advanced MBA students, or professionals with similar background". Residing in the third camp, I can say from this point of view that this book could have been subtitled, "the Practitioner's Portable Ph.D." Academic researchers, students, and practitioners of finance should all value Cochrane's Asset Pricing enough to own a copy.

Asset Pricing is extremely readable, as Cochrane stresses economic intuition over formal proofs. The book is structured into four parts: 1) asset pricing theory; 2) asset pricing models; 3) options and interest rates; 4) an empirical survey. Cochrane begins powerfully, introducing us to the notion that the consumption-based asset pricing equation, given by an investor's first-order conditions, is the central formulation in asset pricing; market-based models simply consider the market returns specified in the consumption models to be exogenously determined free parameters. Cochrane emphasizes that all factor models are derived as specializations of the consumption-based model, using extra variables to proxy marginal utility.

In Part 1, Cochrane covers the field from the Law of One Price, to the mean-variance frontier, to the CCAPM, the CAPM, ICAPM and APT, covering both discrete- and continuous-time, as well as market- and consumption-oriented approaches.
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37 of 41 people found the following review helpful By Giuseppe A. Paleologo on July 10, 2007
Format: Hardcover Verified Purchase
It's probably true that the first book you study about a subject inevitably determines your approach to it afterwards. My first book on asset pricing was Duffie's Dynamic Asset Pricing Theory (2nd ed), and it has perhaps forever biased my judgment. Given this caveat, I wanted to like this book. For econometricians, the stochastic discount approach is increasingly important, and Cochrane's articles are engaging and well written. But, no matter what the blurbs on the back cover of the book say, or what some Amazon reviewers claim, this is a flawed book. It's true that "the hurdles of asset pricing are really conceptual rather than mathematical" (last sentence in the book preface), but this is no excuse for being sloppy, and sloppiness in this book abounds. Assumptions are not clear; theorems are imprecisely stated. Continuous-time formulations pop up without explanation of the variables or of the motivation behind them. Expected-utility derivations are the main tool used by the author, but the connection between no-arbitrage, utility maximization and equilibrium are not clear, and one is led to think that the stochastic discount is unique to this line of reasoning. On the positive side, there are many interesting results and many intuitive explanations. My recommendation: i) read Duffie or Pliska first; ii) take the plunge and download Hansen & Richard's 1987 Econometrica paper (very dense); iii) read Cochrane, but reobtain all the results independently from what you have learned in in i) and ii).
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18 of 21 people found the following review helpful By A Customer on February 2, 2002
Format: Hardcover
This book presents finance in the modern way: p=E(mx). After having read it, the reader should be able to understand the papers currently published in the field. That's the big advantage of the book, because, in this sense, it is better than Duffie's, Dothan's or Ingersoll's. Be advised that the book is not worried about technicallities or math, but the economics underlying the models in it.
However some deep discussions assumes the reader knows: mean-variance frontier, (C)CAPM, APT, and so on, including the several empirical tests already performed on these models and their results. This is not always true, and the reader can easily get lost.
The author uses graphs to clarify the ideas. It is not always successful. Many graphs are confusing. For instance, the author assumes the reader knows how to add and to subtract vectors graphically, which is really easy if you knew that in advance, but difficult to figure out if you do not.
Also there are several minor mistakes the reader should take care of. I am sure the second edition of the book will correct those mistakes and will make the book a lot better.
I think the part talking about the GMM econometrics very clear and that helps a lot to implement the models presented in it.
I recommend the book, mainly because there is no other book treating modern finance like that. Once you get used to it, you'll see the book is not difficult and very useful.
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7 of 8 people found the following review helpful By therosen VINE VOICE on March 25, 2006
Format: Hardcover
Cochrane provides a detailed text at the leading edge of Finance. It is written in an informal manner from one who loves Finance, to others who love Finance. As such, it is not an introduction to the field or "Pop Finance for Dummies". That said, it can bring one with a strong background in math and moderate background in Finance to the leading empirical edge of Asset Pricing. Although written in a light manner, each chapter requires several readings to understand. Definitely not for wimps!
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