Authors:
- Discusses the novel and controversial topic of econophysics
- Looks at systematic risk as a divisible concept, comparable to the building blocks of matter
- Approaches capital asset pricing from a dynamic perspective
- Includes supplementary material: sn.pub/extras
Part of the book series: Quantitative Perspectives on Behavioral Economics and Finance (QPBEF)
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Table of contents (13 chapters)
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Front Matter
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The First Generation: Addressing Markets Up and Down
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Front Matter
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The Second Generation: The Strange Charm of Volatility and Correlation
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Front Matter
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The Third Generation: Truth and Beauty in Cash-Flow and Discount-Rate Effects
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Front Matter
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Back Matter
About this book
This book rehabilitates beta as a definition of systemic risk by using particle physics to evaluate discrete components of financial risk. Much of the frustration with beta stems from the failure to disaggregate its discrete components; conventional beta is often treated as if it were "atomic" in the original Greek sense: uncut and indivisible. By analogy to the Standard Model of particle physics theory's three generations of matter and the three-way interaction of quarks, Chen divides beta as the fundamental unit of systemic financial risk into three matching pairs of "baryonic" components. The resulting econophysics of beta explains no fewer than three of the most significant anomalies and puzzles in mathematical finance. Moreover, the model's three-way analysis of systemic risk connects the mechanics of mathematical finance with phenomena usually attributed to behavioral influences on capital markets. Adding consideration of volatility and correlation, and of the distinct cash flow and discount rate components of systematic risk, harmonizes mathematical finance with labor markets, human capital, and macroeconomics.
Reviews
Authors and Affiliations
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College of Law, Michigan State University, East Lansing, USA
James Ming Chen
About the author
James Ming Chen holds the Justin Smith Morrill Chair in Law at Michigan State University, USA. His books, Disaster Law and Policy, Postmodern Portfolio Theory, and Finance and the Behavioral Prospect cover a broad range of issues concerning extreme events and risk management, from natural to financial disasters. He is of counsel to the Technology Law Group of Washington, DC; a public member of the Administrative Conference of the United States; and an elected member of the American Law Institute. A magna cum laude graduate of Harvard Law School and a former editor of the Harvard Law Review, Chen also served as a clerk to Justice Clarence Thomas of the Supreme Court of the United States.
Bibliographic Information
Book Title: Econophysics and Capital Asset Pricing
Book Subtitle: Splitting the Atom of Systematic Risk
Authors: James Ming Chen
Series Title: Quantitative Perspectives on Behavioral Economics and Finance
DOI: https://doi.org/10.1007/978-3-319-63465-4
Publisher: Palgrave Macmillan Cham
eBook Packages: Economics and Finance, Economics and Finance (R0)
Copyright Information: The Editor(s) (if applicable) and The Author(s) 2017
Hardcover ISBN: 978-3-319-63464-7Published: 17 October 2017
Softcover ISBN: 978-3-319-87564-4Published: 18 August 2018
eBook ISBN: 978-3-319-63465-4Published: 04 October 2017
Series ISSN: 2662-3986
Series E-ISSN: 2662-3994
Edition Number: 1
Number of Pages: XVI, 287
Topics: Behavioral Finance, Behavioral/Experimental Economics, Economic Theory/Quantitative Economics/Mathematical Methods