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Quantitative Perspectives on Behavioral Economics and Finance

Postmodern Portfolio Theory

Navigating Abnormal Markets and Investor Behavior

Authors: Chen, James Ming

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  • ISBN 978-1-137-54464-3
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Hardcover $149.99
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  • ISBN 978-1-137-54463-6
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  • Usually dispatched within 3 to 5 business days.
About this book

This survey of portfolio theory, from its modern origins through more sophisticated, “postmodern” incarnations, evaluates portfolio risk according to the first four moments of any statistical distribution: mean, variance, skewness, and excess kurtosis. In pursuit of financial models that more accurately describe abnormal markets and investor psychology, this book bifurcates beta on either side of mean returns. It then evaluates this traditional risk measure according to its relative volatility and correlation components. After specifying a four-moment capital asset pricing model, this book devotes special attention to measures of market risk in global banking regulation. Despite the deficiencies of modern portfolio theory, contemporary finance continues to rest on mean-variance optimization and the two-moment capital asset pricing model. The term postmodern portfolio theory captures many of the advances in financial learning since the original articulation of modern portfolio theory. A comprehensive approach to financial risk management must address all aspects of portfolio theory, from the beautiful symmetries of modern portfolio theory to the disturbing behavioral insights and the vastly expanded mathematical arsenal of the postmodern critique. Mastery of postmodern portfolio theory’s quantitative tools and behavioral insights holds the key to the efficient frontier of risk management.

About the authors

James Ming Chen holds the Justin Smith Morrill Chair in Law at Michigan State University, USA. He teaches, lectures, and writes widely on law, economics, and regulation. His books, Disaster Law and Policy and Postmodern Portfolio Theory, 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, D.C.; 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.

Reviews

“Chen’s work offers an unparalleled view of portfolio theory and its subtleties from one of America’s leading experts in the field.  A must read.” (Chris Brummer, Professor and Director, Institute of International Economic Law, Georgetown University Law Center, USA)

“Chen offers fascinating insight into the fundamentals of corporate finance and behavioral economics. His arguments are rooted in a deep understanding of these fields and showcase a commanding ability to re-conceptualize long-held theories and assumptions in corporate finance through the lens of behavioral economics.  He brings enormous depth of understanding to develop arguments that will leave a lasting mark on how we think about corporate finance, investment strategy, and the role of finance in the economy.” (Yesha Yadav, Associate Professor of Law, Vanderbilt University Law School, USA)

“Chen describes important advances in our understanding of markets and behavior. This book is a comprehensive guide to the 'postmodern' approach to finance.” (José-María Montero Lorenzo, Professor of Statistics, University of Castille-La Mancha, Spain)

“Behavioral finance may not be the “mainstream” asset pricing theory taught and researched, but it has been embraced for decades by financial professionals.   Chen provides not only a comprehensive discussion on the risk aversion phenomena observed in markets, but also suggests an innovative approach for understanding and measuring its components.” (Merav Ozair, Assistant Professor of Finance Risk Engineering, New York University, USA)

Table of contents (18 chapters)

Table of contents (18 chapters)

Buy this book

eBook $109.00
price for USA in USD (gross)
  • ISBN 978-1-137-54464-3
  • Digitally watermarked, DRM-free
  • Included format: PDF, EPUB
  • ebooks can be used on all reading devices
  • Immediate eBook download after purchase
Hardcover $149.99
price for USA in USD
  • ISBN 978-1-137-54463-6
  • Free shipping for individuals worldwide
  • Usually dispatched within 3 to 5 business days.
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Bibliographic Information

Bibliographic Information
Book Title
Postmodern Portfolio Theory
Book Subtitle
Navigating Abnormal Markets and Investor Behavior
Authors
Series Title
Quantitative Perspectives on Behavioral Economics and Finance
Copyright
2016
Publisher
Palgrave Macmillan US
Copyright Holder
The Editor(s) (if applicable) and The Author(s)
eBook ISBN
978-1-137-54464-3
DOI
10.1057/978-1-137-54464-3
Hardcover ISBN
978-1-137-54463-6
Series ISSN
2662-3986
Edition Number
1
Number of Pages
XX, 339
Number of Illustrations
1 b/w illustrations, 8 illustrations in colour
Topics