Stock Markets, Investments and Corporate Behavior

A Conceptual Framework of Understanding

Stock Markets, Investments and Corporate Behavior examines the nature of stock market growth and decline, the function of financial markets, and their implications for commercial companies. Traditionally, finance academics have attempted to understand financial markets and commercial companies as physicists approach their subject matter: with a set of laws in mind that govern the field. But finance is not physics. The academic's approach falsely assumes that financial markets can be understood as systems within which self-interested maximizers behave in logical ways that are coordinated by the invisible hand of the price mechanism. This book demonstrates that finance is more appropriately understood as a field in which investors and finance managers may or may not use rational calculations as the basis of their decision making.

This book opens with an effective dismantling of the traditional mathematical approach used to understand and describe markets and corporate financial behavior. In its place, the mathematics of growth and decline is developed anew, while holding to the realization that the decisions of organizations rely on the choices of real people with limited information available to them. The book will appeal to all students who wish to reappraise their knowledge of finance in a thoughtful manner. Specifically, this book is designed to appeal to anyone who wishes to refine their understanding of the nature of stock markets and financial growth, optimal portfolio allocation, option pricing, asset valuation, corporate financial behavior, and what it means to be ethical in our financial institutions.

Contents:

• Introduction: Stock Markets, Investments and Corporate Financial Decision Making

• Foundations of Stock Pricing: A Critical Assessment:

  • The Capital Asset Pricing Model
  • The Fama and French Three-Factor Model
  • Beyond the Fama and French Three-Factor Model

• Foundations of Corporate Financial Activity: A Critical Assessment:

  • The Modigliani and Miller Propositions and the Foundations of Corporate Finance

• Stock Markets and Investment Choices: Growth, Asset Pricing and Portfolio Construction:

  • Mathematics of Growth
  • The Statistical Growth of Asset Portfolios
  • The Fundamentals of Growth, Asset Pricing, and Portfolio Allocation
  • A Model of Asset Pricing and Portfolio Allocation
  • Stock Mispricing
  • Practitioner Client Portfolios, the Risk Premium, and Time Diversification
  • Option Pricing: The Black–Scholes Model

• Corporate Financial Decision Making:

  • Valuation of the Firm's Cash Flows
  • Corporate Finance in a Strategic/Behavioral Context
  • Ethics
  • Academic Finance: Responsible Enquiry or Stamp Collecting?

Readership: PhD, graduate and final year undergraduate students and practitioners in the field of finance.
Key Features:

• Offers a rigorous and intuitive framework of understanding of markets, investments and corporate financial decision-making, that convinces the student of the worthwhileness of their intellectual achievements — not just for passing exams — but also worthy to be carried into the workplace as a foundation of their own career contribution to the profession
• Original text deriving from the developed ideas and theories of the author whose foundation publications for the text span over twenty publications in top-ranked academic journals