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Technical note
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Reference no. 201-010-6
Authors: Brian Kettell
Published by: Centre for Islamic Banking and Finance
Published in: 2001
Length: 19 pages
Data source: Generalised experience

Abstract

The announcement that the Nobel Prize for Economics had been awarded to Merton Miller, William Sharpe and Harry Markowitz, in 1990, finally acknowledges that financial economics is a genuine science, in the same league as the physical sciences. Defining what is financial economics is not as simple as it is a subject, which overlaps with both economics, finance and also with statistics. In this note we will use the term to refer to those aspects of economics, finance, and investment management which involve the study of financial markets. More precisely we will be using the term financial economics as being a subject which concerns itself with the building of models of asset price determination for investors seeking to build portfolios in a world of uncertainty. A key aspect of financial economics is how to value both individual securities and portfolios of securities. Finance itself, as a subject for serious academic study in its own right, is relatively new, having grown out of applied economics over the past 50 years or so. Financial economics is even newer. Notwithstanding its short life, the empirical research and theoretical developments in financial economics have been immense; with the USA dominating the subject for most of the period.

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Abstract

The announcement that the Nobel Prize for Economics had been awarded to Merton Miller, William Sharpe and Harry Markowitz, in 1990, finally acknowledges that financial economics is a genuine science, in the same league as the physical sciences. Defining what is financial economics is not as simple as it is a subject, which overlaps with both economics, finance and also with statistics. In this note we will use the term to refer to those aspects of economics, finance, and investment management which involve the study of financial markets. More precisely we will be using the term financial economics as being a subject which concerns itself with the building of models of asset price determination for investors seeking to build portfolios in a world of uncertainty. A key aspect of financial economics is how to value both individual securities and portfolios of securities. Finance itself, as a subject for serious academic study in its own right, is relatively new, having grown out of applied economics over the past 50 years or so. Financial economics is even newer. Notwithstanding its short life, the empirical research and theoretical developments in financial economics have been immense; with the USA dominating the subject for most of the period.

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