History of the Theory of Investments
An Annotated Bibliography
This is a
wonderful book in which Mark Rubinstein walks readers through the classic papers
of finance, starting with Fibonacci's 1202 work on present value calculations,
progressing through the works of Cootner, Markowitz, Modigliani-Miller, Sharpe,
Fama, and leading up to the present day.
Rubinstein
describes the book as an annotated bibliography, and that is pretty much what it
is. In largely chronological order, he lists important papers and provides brief
commentaries on what they say and what they mean. His thesis is that authors
credited with discoveries are not always the first to make those discoveries.
Stated more strongly, this is Stigler's Law that scientific discoveries are
never named for their original discoverers. (True to form, Stigler wasn't the
original discoverer of Stigler's Law.) Accordingly, Rubinstein strives to
identify both famous papers and forgotten papers that should have attracted more
attention than they did.
He delves into
advanced mathematics as appropriate, and he even offers some mathematical
derivations. For the most part, this technical material is set off from the main
text, so readers can easily skip it, should they want to.
Contents
Preface
1.
The Ancient Period: Pre-1950
2.
The Classical Period: 1950-1980
3.
The Modern Period: Post-1980
Index of Ideas
Index of Sources
This isn't an easy
book to read because the chronological approach has the author jumping around
from topic to topic. If you are new to finance, I would recommend you read
Bernstein's (1993)
narrative-based history first. For everyone else, this is a wonderful book.
People with a
passing familiarity with finance will find plenty to flesh our their
understanding here. For knowledgeable practitioners or scholars, much of what is
here will already be familiar, but Rubinstein has dug up enough nuggets of
historical importance that even these readers will find the book worthwhile.
For example,
Rubinstein identifies a little-known paper that largely anticipated
Modigliani-Miller theory on debt vs. equity financing of a firm. Do you know
what paper first advanced the concept of portfolio insurance? Rubinstein can
tell you. How about sorting out the tortured history of duration? Rubinstein
covers the basics and tells readers what important papers to see. These are just
some of the fascinating topics covered.
I certainly
enjoyed the book. I learned much. I recommend it. [June 29,
2006]
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