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I have an interest in financial economics, and I plan to take the graduate sequence, however I did not take an undergraduate course in that field. I would really appreciate it if someone could recommend a textbook for financial economics. I would prefer the book involved calculus, so I can get the fundamentals of problems (such as asset pricing) I may see in the future.

Two books which have been recommended to me are: "The Economics of Financial Markets" by Roy E. Bailey and "Principles of Financial Economics" by LeRoy and Werner. Are either of these worth reading?

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The recommended books are decent. From these two I'd go with Bailey first and if you're comfortable with that, then LeRoy & Werner. The latter requires some background in linear algebra and optimization theory.

If you want to study some econometric applications for financial economics, you might try:

  • Cuthbertson & Nitzsche: Quantitative Financial Economics: Stocks, Bonds and Foreign Exchange
  • Campbell, Lo & MacKinlay: The Econometrics of Financial Markets
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  • $\begingroup$ Hi. These are nice recommendations. Maybe you could separate each of them into separate answers so people can vote on them individually -- See meta.economics.stackexchange.com/questions/169/… for some guidelines on answering list questions. $\endgroup$ – cc7768 Mar 24 '16 at 13:25
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ASSET PRICING THEORY:

  • Cochrane, Asset Pricing is a good book in that it displays the way that hard-core asset pricers see the world.

  • Huang and Litzenberger, Foundations for Financial Economics is said to be the most solid, if a bit outdated, textbook.

CORPORATE FINANCE THEORY:

  • Tirole, The Theory of Corporate Finance, has they key insights for about half the literature. A chapter per month would make you a very solid corporate finance economist. The other Tirole books contain about 90% of the rest of non-asset pricing stuff.

STATE OF THE LITERATURE:

The textbooks often lag way behind what people are writing about in their papers, for good or bad. They also represent one particular view. There are a bunch of so-called Handbooks(mostly by Elsevier) that are a good way to get a broad sense of the key questions, authors, methods, issues. I would look at the financial economics, financial intermediation, banking, finance, handbooks.

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  • $\begingroup$ Thanks, I actually already purchased the Cochrane book, so I'm glad to hear it is good! I have not had a chance to look at it yet. $\endgroup$ – DornerA May 5 '16 at 2:42

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