Principles of Financial Economics
Stephen F. LeRoy，Jan Werner
This book is based on material used in the introductory finance field sequence in the economics departments of the University of California, Santa Barbara and the University of Minnesota, and in the Carlson School of Management of the latter. At the University of Minnesota it is now the basis for a two-semester sequence, while at the University of California, Santa Barbara it is the basis for a one-quarter course. In a one-quarter course it is unrealistic to expect that students will master the material; rather, the intention is to introduce the major ideas at an intuitive level. Students writing dissertations in finance typically sit in on the course again in years following the year they take it for credit, at which time they digest the material more thoroughly. It is not obvious which method of instruction is more efficient.
Our students have had good preparation in Ph.D.-level microeconomics, but have not had enough experience with economics to have developed strong intuitions about how economic models work. Typically they had no previous exposure to finance or the economics of uncertainty. When that was the case we encouraged them to read undergraduate-level finance texts and the introduc- tions to the economics of uncertainty cited above. Rather than emphasizing technique, we have tried to discuss results so as to enable students to develop intuition.