Asset Pricing

Winner of the prestigious Paul A. Samuelson Award for scholarly writing on lifelong financial security, John Cochrane's Asset Pricing now appears in a revised edition that unifies and brings the science of asset pricing up to date for advanced students and professionals. Cochrane traces the pricing of all assets back to a single idea - price equals expected discounted payoff - that captures the macro-economic risks underlying each security's value. By using a single, stochastic discount factor rather than a separate set of tricks for each asset class, Cochrane builds a unified account of modern asset pricing. He presents applications to stocks, bonds, and options. Each model - consumption based, CAPM, multifactor, term structure, and option pricing - is derived as a different specification of the discounted factor. The discount factor framework also leads to a state-space geometry for mean-variance frontiers and asset pricing models. It puts payoffs in different states of nature on the axes rather than mean and variance of return, leading to a new and conveniently linear geometrical representation of asset pricing ideas. Cochrane approaches empirical work with the Generalized Method of Moments, which studies sample average prices and discounted payoffs to determine whether price does equal expected discounted payoff. He translates between the discount factor, GMM, and state-space language and the beta, mean-variance, and regression language common in empirical work and earlier theory. The book also includes a review of recent empirical work on return predictability, value and other puzzles in the cross section, and equity premium puzzles and their resolution. Written to be a summary for academics and professionals as well as a textbook, this book condenses and advances recent scholarship in financial economics.

ISBN 0691121370   Pages 568 ISBN13 9780691121376 (What's this?)   Volumes 1 Publisher The University Press Group Ltd   Weight (grammes) 914 Imprint Princeton University Press   Published in New Jersey Format Hardback   Previous ISBN 9780691074986 Publication date 03 Jan 2005   Height (mm) 229 Library of Congress HG4636.C56   Width (mm) 152 DEWEY 332.6   Spine width (mm) 40 DEWEY edition DC22   Academic level Professional / Scholarly, Tertiary education

1		Consumption-based model and overview		3
2		Applying the basic model		35
3		Contingent claims markets		49
4		The discount factor		61
5		Mean-variance frontier and beta representations		77
6		Relation between discount factors, betas, and mean-variance frontiers		99
7		Implications of existence and equivalence theorems		121
8		Conditioning information		131
9		Factor pricing models		149
10		GMM in explicit discount factor models		189
11		GMM : general formulas and applications		201
12		Regression-based tests of linear factor models		229
13		GMM for linear factor models in discount factor form		253
14		Maximum likelihood		267
15		Time-series, cross-section, and GMM/DF tests of linear factor models		279
16		Which method?		293
17		Option pricing		313
18		Option pricing without perfect replication		327
19		Term structure of interest rates		349
20		Expected returns in the time series and cross section		389
21		Equity premium puzzle and consumption-based models		455
App. A.1		Brownian motion		489
App. A.2		Diffusion model		491
App. A.3		Ito's lemma		494

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

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