Investors and Markets: Portfolio Choices, Asset Prices, and Investment Advice

by William F. Sharpe

In Investors and Markets , Nobel Prize-winning financial economist William Sharpe shows that investment professionals cannot make good portfolio choices unless they understand the determinants of asset prices. But until now asset-price analysis has largely been inaccessible to everyone except PhDs in financial economics. In this book, Sharpe changes that by setting out his state-of-the-art approach to asset pricing in a nonmathematical form that will be comprehensible to a broad range of investment professionals, including investment advisors, money managers, and financial analysts. Bridging the gap between the best financial theory and investment practice, Investors and Markets will help investment professionals make better portfolio choices by being smarter about asset prices.


Based on Sharpe's Princeton Lectures in Finance, Investors and Markets presents a method of analyzing asset prices that accounts for the real behavior of investors. Sharpe makes this technique accessible through a new, one-of-a-kind computer program (available for free on his Web site, at that enables users to create virtual markets, setting the starting conditions and then allowing trading until equilibrium is reached and trading stops. Program users can then analyze the final portfolios and asset prices, see expected returns, and measure risk.


In addition to popularizing the most sophisticated form of asset-price analysis, Investors and Markets summarizes much of Sharpe's most important previous work and reflects a lifetime of thinking about investing by one of the leading minds in financial economics. Any serious investment professional will benefit from Sharpe's unique insights.

Genres: Economics, Nonfiction, Finance

232 pages, Hardcover

First published October 2, 2006

Reviews

[Max Lybbert · Rating 5 out of 5]

Bill Sharpe won the 1990 Nobel Prize in Economics for his work on CAPM. At the time he taught at Stanford, and although he's retired he occasionally gives lectures. This book comes from the notes for a series of lectures he gave in the early 2000s on introductory finance, portfolio management and asset pricing.

The book is very informal. And, although Sharpe received the Nobel Prize for CAPM, he has since decided that CAPM doesn't give a complete view. The book covers much of the same ground as Macro Investment Analysis was supposed to. There is additional material compared to Macro Investment Analysis, and Investors And Markets is well worth the cover price.

[Lucille Nguyen · Rating 3 out of 5]

Economists will literally write a toy model and write an entire book on it. Mainly, most of this book is C++ simulations on a toy economy and various traders. To summarize: the math sez you should diversify, economize, personalize, and contextualize. Or, buy an index fund (or multiple) that widely meets the market conditions and your needs. Some interesting mathematics in it but it's all applied to essentially straight-line and logarithmic graphs on an oversimplified model.