Customer Reviews

Financial Economics (2nd Edition)

5 star:		(3)
4 star:		(0)
3 star:		(0)
2 star:		(0)
1 star:		(1)

 

 

Introductory books are a lot like sports that have compulsory and freestyle segments. In all intro books there's a core of material that needs to be covered (in pretty much a prescribed fashion) and then there is the freestyle component that either soars or sinks like lead. This book hits all of its marks on the compulsories then excels in the freestyle segments.

This book covers the fundamentals in a way that is cohesive, coherent and engagingly constructed. The prose sets the right tone; the math that is used remains in service of the point being made without overshadowing; the short inline anecdotes reinforce the themes and make for an entertaining read. Having taught both undergraduate and graduate courses on investments, I like this book on the strengths of its fundamentals.

The real value of the book, over many other intro books, is the material that goes beyond the compulsory. For example, chapter 5 covers the investment problem at the fundamental level of the choice between saving and consumption; a pet peeve of mine is when investments texts ignore the *purpose* of the portfolio. Chapter 16 covers options in a way that is accessible and correct; again here the math is the servant, but not the master, of the ideas promulgated. Finally, Chapter 17 on real options comprises the last chapter that any course syllabus has as an aspirational goal; well written and informative, students will *want* to read this chapter even if the course ends too soon.

In short, this is a great book to have, read and use.

I like Financial Economics very much. I assigned several chapters from this book to my EC171 students at Boston University. The introductory chapters about the time value of money and interest and inflation are clear and accessible for our students.

While another review bemoans the lack of formulas in the chapters (I believe the formulas were well explained), I loved that the book went so far as to explain with examples how to use Microsoft Excel's financial functions to perform all necessary calculations. For my students (who are from the arts and sciences, not the school of engineering) clear instructions on using Excel is a more important benefit than more algebra.

In my experience, most introductory finance texts have too much of a corporate finance worldview. Financial Economics is a more balanced toward the needs of individuals making decisions. Without compunction, I recommend this text for introductory finance classes.

As a professor at The Wharton School, I am often asked for a recommendation for an introductory finance textbook by friends, incoming students as well as even former students who want a good reference for their jobs. My usual response is Bodie, Merton and Cleeton. It strikes the right balance between being comprehensive, intuitive and succinct. To be sure, I have known and admired the authors for many years; they have defined much of the field that they discuss. But I am pretty picky about the books that I recommend to friends and students. This one gets it right.

I am amused by the professors who rate this book so highly; have you ever followed up with those to whom you recommended the book?

While working through this text for a distance education course, I am finding it a difficult and presumptuous book which introduces concepts and formulas without any explanation as to what the parts mean. Seemingly from out of nowhere, numbers are thrown into formulas without explanation of their meaning or even where they come from. The end of chapter questions are of extreme difficutly at times, trying to trick and outsmart you rather than re-enforcing concepts. Expectation of previous knowledge of the workings of financial concepts and markets make parts of this text impossible to understand without outside help.

For an introductory text, this one does an extremely poor job of explaining the concepts. From the perspective of a student and not a professor to whom these concepts should be elementary, this is a difficult and poorly geared text that is nowhere near "high-school level."