Houthakker H.S., Williamson P.J. The Economics of Financial Markets

New York: Oxford University Press. – 1996. – 375 p. Does economics have anything useful to say about the financial markets? Thefact that most large financial firms employ sizable staffs of economists indicates that it does. During the last three decades the study of these markets has been transformed by a number of eminent scholars, several of whom subsequently received the Nobel prize in economics. The most illuminating of their contributions were the statement of the Efficient Market Hypothesis in its various forms, of the Capital Assets Pricing Model, and of options pricing theory. These subjects are taken up in Chapters 5, 6, and 8, respectively. In addition, Chapter 2 draws in part on Irving Fisher's theory of interest rates, Chapter 4 on Markowitz's analysis of portfolio selection, and Chapter 7 on Tobin's comparison of asset values and Porter's ideas on business strategy, while Chapter 10 owes much to Working's insights into futures trading. This academic work has had a significant impact on the actual operation of financial markets. This book has its origin in an undergraduate lecture course entitled "Securities, Options and Futures" that Houthakker taught once a year starting in 1980. Designed as an elective for economics majors, the course consistently attracted a sizable enrollment, which suggests that it filled a need. Its purpose was to make students with a background in microeconomics and macroeconomics—but with only modest knowledge of mathematics—aware of the light shed by the theoretical contributions just mentioned on the financial markets.The Place of Financial Markets in the Economy.
The Supply of Securities.
The Demand for Securities.
Securities Markets and Their Efficiency.
The Determination of Equity Prices.
Security Analysis.
Options and Options Pricing.
Futures Contracts and Futures Markets.
Futures Prices.
Regulation of Financial Markets.
Notes.Author Index.
Subject Index.