DMCA
A Simple Model of Capital Market Equilibrium with Incomplete Information (1987)
| Venue: | JOURNAL OF FINANCE |
| Citations: | 717 - 2 self |
BibTeX
@ARTICLE{Merton87asimple,
author = {Robert C. Merton},
title = {A Simple Model of Capital Market Equilibrium with Incomplete Information},
journal = {JOURNAL OF FINANCE},
year = {1987},
pages = {483--510}
}
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Abstract
The sphere of modern financial economics encompases finance, micro investment theory and much of the economics of uncertainty. As is evident from its influence on other branches of economics including public finance, industrial organization and monetary theory, the boundaries of this sphere are both permeable and flexible. The complex interactions of time and uncertainty guarantee intellectual challenge and intrinsic excitement to the study of financial economics. Indeed, the mathematics of the subject contain some of the most interesting applications of probability and optimization theory. But for all its mathematical refinement, the research has nevertheless had a direct and significant influence on practice. It was not always thus. Thirty years ago, finance theory was little more than a collection of anecdotes, rules of thumb, and manipulations of accounting data with an almost exclusive focus on corporate financial management. There is no need in this meeting of the guild to recount the subsequent evolution from this conceptual potpourri to a rigorous economic
Keyphrases
simple model incomplete information capital market equilibrium exclusive focus mathematical refinement complex interaction public finance financial economics monetary theory intrinsic excitement investment theory corporate financial management modern financial economics industrial organization interesting application significant influence conceptual potpourri finance theory subsequent evolution uncertainty guarantee intellectual challenge optimization theory
