Getting Started In Finance

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Introduction - Understanding the basic concepts that underlie the science of finance is not difficult.  For any person who is interested in managing their own money and making their own financial decisions, it is probably the single most important thing you can do to improve your financial situation.  I have set forth below, first, the two Books that I would recommend you read to get started in this fascinating field.  Or you can read the academic journal articles noted below in the Overview Articles section which summarize the research in the field.  From there, you can keep up with the latest research by reading the articles in the Highly Recommended section and, of course, the articles and sites mentioned on the main page.  And don't worry about understanding the complex formulas and mathematical proofs contained in many of the articles.  Reading the abstract, introduction and conclusion and skimming over the material you do not fully understand (as I do sometimes), will allow you to comprehend the main points in most articles.  Also, check out the Classics section below which has some of the seminal works in the field, and Other Books section which has some very good reads.  This page last updated on:  Sunday February 01, 2015 01:25:44 PM

 

 

Books

   I have personally read hundreds of books on finance, the stock market, and economic and financial history. Of course, there are many fascinating well-written books, but I can honestly say you only need to read two or three books to get started studying the science of finance (Capital Ideas) and applying some of the principles to your own benefit (The Intelligent Asset Allocator or Mark Hebner's Index FundsUpdate: although there has been lots of research since I first made these recommendations, I still recommend you start with these books.  They remain, in my view, the best way to get an understanding of the theories and concepts (JPS 2/2/15).:

     

Introductory and Overview Articles

   The following articles contain good, easily understood summaries of the research.

Goetzmann, An Introduction To Investment Theory

July 2004  - Galagedera, A survey on risk-return analysis
Dimson, Mussavian, Three Centuries Of Asset Pricing (2000) Stracca, Behavioral Finance: Where Do We Stand? (2002)

Cochrane, New Facts In Finance (2001)

Shiller, From Efficient Market Theory To Behavioral Finance (2002)

Ritter, The Biggest Mistakes We Teach  (2002)

Miller, The History Of Finance (1999)
Nouriel Roubini and David Backus
Lectures in Macroeconomics
 
September 2010 - 12 Steps to Understanding the Equity Market

Fama, Market Efficiency, Long-Term Returns, and Behavioral Finance (1997)

Read more at: Altruist's Fantastic Collection of Articles

 

 

The *** Highly Recommended *** List For Getting Started

January 2006 (published November 2005) -Bhattacgarta, Galpin,  Is Stock Picking Declining Around the World? 

February 2004 - Fernandez, Are Calculated Betas Worth for Anything?

January 2004 (published in December 2003) -  Phalippou, What Drives The Value Premium? 

Fall 2003 - Jorion, The Long-Term Risks of Global Stock Markets

June 2003 - Hirshleifer, Shumway, Good Day Sunshine: Stock Returns And The Weather

February 2003 - Ilmanen, Expected Returns On Stocks and Bonds (abstract only)

December 2002 - Asness, Fight the Fed Model: The Relationship Between Stock Market Yields, Bond Market Yields, and Future Returns

September 2002 - Durham,  The Extreme Bounds Of The Cross-Section Of Expected Stock Returns

Fall 2002 - Chan, Karceski, Lakonishok, The Level and Persistence of Growth Rates 

 

See the Highly Recommended list on the main page for much more.

 

Some Of the Classics

Bachelier, The Theory Of Speculation (1900) 

Cowles, Stock Market Forecasting (1944)

Markowitz, Portfolio Selection (1952)

Tobin,  Liquidity Preference as Behavior Towards Risk, Review of Economic Studies No. 25, 68-85, (1958)

Sharpe, Capital Asset Prices - A Theory of Market Equilibrium Under Conditions of Risk, Journal of Finance, pp. 425-442 (1964)

Fama, Random Walks in Stock Market Prices, Chicago School of Business Selected Paper Series, Paper #16, Financial Analysts Journal, September/October 1965, pp. 55-59 (reprinted in Financial Analysts Journal, January/February 1995)

Black, Scholes, The Pricing of Options and Corporate Liabilities, Journal of Political Economy (1973)

 Fama, French, The Cross Section of Expected Stock Returns, Journal of Finance 47, 427-465  (1992)

Also check out these great reading lists from articles from the past 30 years - Arnold, Butler, Crack, Altintig, Impact: What Influences Finance Research?

Other Books (many of which can be purchased used, for a couple of dollars) (last updated in 2013 - but still a pretty good list)

           
   Frightening, but indisputable, economic analysis 

 

 

 

  An amazing research effort in time and scope, but written in Bernsteinís usual, easy-to-read and intelligent style

 

Fractal mathematics applied to finance - good stuff !!

 

  Truly ground breaking research!!; but dense mathematical explanations

 

 
           
     very interesting description of how the movie industry really operates 

     
           
           

this is the updated version to Bernstein's classic recommended above - my recommendation is that the earlier edition be read first, especially because it can be bought for $0.01

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a history of finance told through Goodfellas 

 

 

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high finance conspiracy theory - oil, dollars and the Iraq Oil Bourse 

 
           
           
           
     easy to read, fun, and interesting history of basic science discoveries chronologically 

 great 1996 analysis of America's strengths (for once); much may still be applicable 

 

 the definitive book on tornadoes and storm chasing; good technical meteorology discussions 

 the history of our national debt 

  Altruist's Fantastic Collection of Books      

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