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Financial Decisions and Markets: A Course in Asset Pricing
From the field's leading authority, the most authoritative and comprehensive advanced-level textbook on asset pricing
In Financial Decisions and Markets , John Campbell, one of the field’s most respected authorities, provides a broad graduate-level overview of asset pricing. He introduces students to leading theories of portfolio choice, their implications for asset prices, and empirical patterns of risk and return in financial markets. Campbell emphasizes the interplay of theory and evidence, as theorists respond to empirical puzzles by developing models with new testable implications. The book shows how models make predictions not only about asset prices but also about investors’ financial positions, and how they often draw on insights from behavioral economics.
After a careful introduction to single-period models, Campbell develops multiperiod models with time-varying discount rates, reviews the leading approaches to consumption-based asset pricing, and integrates the study of equities and fixed-income securities. He discusses models with heterogeneous agents who use financial markets to share their risks, but also may speculate against one another on the basis of different beliefs or private information. Campbell takes a broad view of the field, linking asset pricing to related areas, including financial econometrics, household finance, and macroeconomics. The textbook works in discrete time throughout, and does not require stochastic calculus. Problems are provided at the end of each chapter to challenge students to develop their understanding of the main issues in financial economics.
The most comprehensive and balanced textbook on asset pricing available, Financial Decisions and Markets is an essential resource for all graduate students and practitioners in finance and related fields.
In Financial Decisions and Markets , John Campbell, one of the field’s most respected authorities, provides a broad graduate-level overview of asset pricing. He introduces students to leading theories of portfolio choice, their implications for asset prices, and empirical patterns of risk and return in financial markets. Campbell emphasizes the interplay of theory and evidence, as theorists respond to empirical puzzles by developing models with new testable implications. The book shows how models make predictions not only about asset prices but also about investors’ financial positions, and how they often draw on insights from behavioral economics.
After a careful introduction to single-period models, Campbell develops multiperiod models with time-varying discount rates, reviews the leading approaches to consumption-based asset pricing, and integrates the study of equities and fixed-income securities. He discusses models with heterogeneous agents who use financial markets to share their risks, but also may speculate against one another on the basis of different beliefs or private information. Campbell takes a broad view of the field, linking asset pricing to related areas, including financial econometrics, household finance, and macroeconomics. The textbook works in discrete time throughout, and does not require stochastic calculus. Problems are provided at the end of each chapter to challenge students to develop their understanding of the main issues in financial economics.
The most comprehensive and balanced textbook on asset pricing available, Financial Decisions and Markets is an essential resource for all graduate students and practitioners in finance and related fields.
480 pages, Hardcover
Published October 31, 2017
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July 15, 2025
The book serves as an extensive (second-year PhD level) course on asset pricing in discrete time. It begins by building a foundation of asset pricing models using simple static frameworks. The topics covered in this first part – risk aversion, static portfolio choice, equilibrium asset pricing, and the stochastic discount factor – are concepts that every macro-finance economist should understand and be able to explain by heart.
For the majority of the book, it extends into (ii) intertemporal models and (iii) explores the importance of investor heterogeneity. These parts serve as a valuable survey or reference on various aspects and extensions of basic models. In this way, it goes beyond core asset pricing theory by placing strong emphasis on the empirical motivation behind the modeling choices.
At times, it does feel like an endless list of modifications to account for reasonable postulations or stylized facts from data – but isn't that the nature of a reference text? I appreciate the intuition that Campbell provides to the reader, and I'm waiting to read Cochrane's book more thoroughly to make a proper comparison and better understand the differences.
Overall, this is a valuable book to keep on the shelf for quick review or when looking to extend a basic asset pricing idea in a particular direction.
For the majority of the book, it extends into (ii) intertemporal models and (iii) explores the importance of investor heterogeneity. These parts serve as a valuable survey or reference on various aspects and extensions of basic models. In this way, it goes beyond core asset pricing theory by placing strong emphasis on the empirical motivation behind the modeling choices.
At times, it does feel like an endless list of modifications to account for reasonable postulations or stylized facts from data – but isn't that the nature of a reference text? I appreciate the intuition that Campbell provides to the reader, and I'm waiting to read Cochrane's book more thoroughly to make a proper comparison and better understand the differences.
Overall, this is a valuable book to keep on the shelf for quick review or when looking to extend a basic asset pricing idea in a particular direction.
Displaying 1 of 1 review