The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Finance (New Developments)

  • Jiang Wang
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_2012

Abstract

This survey of some of the developments in finance since the mid-1980s begins with advances in the application of arbitrage pricing, and then expands into areas of general asset pricing under the title ‘risk and return’. Limitations in our current understanding of risk as well as more data explorations have led to the ‘discovery’ of anomalies, which challenge classic notions of market efficiency. We examine recent attempts to expand the neoclassical framework to incorporate market imperfections in asset pricing, which, in their more general forms, take centre stage in advances in corporate finance.

Keywords

Adverse selection Agency problems Anchoring Anomalies Arbitrage Arbitrage pricing Asymmetric information Bankruptcy Behavioural finance Belief perseverance Bonds Capital asset pricing model Capital structure Consumption-based capital asset pricing model Contagion Control rights Corporate control Corporate finance Corporate governance Cost of capital Debt and equity Derivatives Efficient market hypothesis Equilibrium Equity premium puzzle Expected utility Finance Finance (new developments) Human capital Incomplete contracts Interest rates Intertemporal capital asset pricing model Inventory cost Irreversible investment Jumps Law of one price Liquidity Market frictions Market microstructure Mean-variance efficient portfolios Moral hazard No arbitrage Optimal contracts Option pricing Overconfidence Private information Probability Reduced form models Risk Risk aversion Risk premium Serial correlation Short-sale constraints Speculative bubbles State-dependent preferences Stochastic discount factor Stochastic volatility models Structural models Substitutable securities Takeovers Trading costs Transaction costs Uncertainty Venture capital 
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Authors and Affiliations

  • Jiang Wang
    • 1
  1. 1.