A History of the Theory of Investments: My Annotated Bibliography

by Mark Rubinstein and Mark Rubinstein

"This exceptional book provides valuable insights into the evolution of financial economics from the perspective of a major player."
-- Robert Litzenberger, Hopkinson Professor Emeritus of Investment Banking, Univ. of Pennsylvania; and retired partner, Goldman Sachs

A History of the Theory of Investments is about ideas -- where they come from, how they evolve, and why they are instrumental in preparing the future for new ideas. Author...

• Format: Hardcover
• Language: English
• ISBN: 0471770566
• ISBN13: 9780471770565
• Release Date: February 2006
• Publisher: Wiley
• Length: 384 Pages
• Weight: 1.40 lbs.
• Dimensions: 1.3" x 6.5" x 9.1"

Customer Reviews

Best history available

Business, Economics, and Finance with Matlab, GIS, and Simulation Models This is the most comprehensive, best researched history of thought in financial economics. It may add two dozen references to my forthcoming book on business valuation; it would have shortened the time I spent researching my book Business Economics and Finance. I agree with Rubenstein that too many authors blindly put down a recent book they read as an authority, and are ignorant of the real sources. If you are writing a scholarly article on financial economics or investment research, you have no excuse for that after Rubenstein's book. The only quibble I have is the idiosyncratic nature of the history, which Rubenstein freely acknowledges in the preface. This is really a quibble, though; I find Rubenstein to be pretty fair in looking at past sources. Very knowledgeable readers may differ from time to time with Rubenstein's chronology, as very knowledgeable readers do with all history. Excellent book.

A Treasure Trove of Historical Context

I'm about halfway through the book and must say that I have been pleasantly surprised. I bought the book as a quick way to present accurate historical context to my students. In my opinion, knowledge does not grow; it evolves. A study of that evolution, with the paths not chosen, is an important step in mastering a discipline. This would be enough for me to recommend the book, but there's much more. Here's a small sample of the items that I've gleaned so far. What is the intersection of business math, gambling gmaes, and Pascal's triangle? (The graphic that he uses look suspiciously like a binomial tree....) The shift from insurance products to investments as the driver of the mathematics of finance. What is the Fisher separation theorem (which my students consider to be obvious) and why is it not obvious? The importance of the Ph.D. thesis of John Burr Williams, one of the most important economists of which you've probably never heard. How Ben Graham nearly got the Modigliani-Miller theorem but didn't believe that his conclusion was realistic. This is just from the first hundred pages. I've already bought about a dozen books to extend my reading and am downloading dozens of articles from JSTOR. Most of us learned investment theory from a textbook. I strongly suggest that you add this book, and its contextual knowledge, to your library.

Probably one of the best books I have ever read

This is arguably one of the best books that I have read. Almost everything relevant to finance and investments is covered in this book, including a good historical discussion of the theories of investment. In addition, Mark Rubinstein has a very clear and simple writing style that transforms complex concepts into words. The proofs are done in a fashion that most readers can understand, and the sections are divided up in easy to break-up sections. This is definitely a must read for any serious student of finance. All of the seminal work in finance is discussed in this text, and this can be used as a guide to asset pricing, corporate finance, investments, and other finance courses. In fact, I would have used this as a supplement to reading journal articles if it were available in the past.

Stunning, Imaginative, Accurate

Mark Rubinstein is a man who likes to think for himself, which is a good thing for the rest of us. Most readers will be familiar with Mark's contributions to financial economics primarily through his co-authorship, with John Cox and Steve Ross, of the binomial options pricing model - no mean feat, that. But his interests and contributions are far more broad. My personal favorite paper of Mark's is his relatively overlooked "The Strong Case for the Generalized Logarithmic Utility Model as the Premier Model of Financial Markets" [GLUM], published in 1977 as the second chapter of Haim Levy and Marshall Sarnatt's "Financial Decision Making under Uncertainty" (Academic Press New York 1977); this is a wonderful model which places restrictions on tastes a la Arrow, Debreau, Hirshleifer, Cass, Stiglitz , Hakansson, Kraus, Grauer and Litzenberger, rather than placing restrictions on beliefs as in the more conventional models commonly understood to represent "Modern Portfolio Theory", i.e., Markowitz, Sharpe, Treynor, Lintner, Mossin, Fama, Jensen, Black, Scholes and Merton. In the 1977 GLUM paper, Rubinstein notes that the latter, MPT-type, models are not necessarily superior to the former type and chalks their popularity up to historical happenstance and ideological path-dependence: "Men were not lacking in evidence, but inherited habits of thought, which often extended beyond science proper to a worldview, [and] caused them to cling stubbornly to superannuated ideas." In "A History of the Theory of Investments", Rubinstein achieves two things: first, he presents his own annotated bibliography of nearly 200 of the most important works in theoretical financial economics; second, he presents a much better etiology of these ideas than a reader might find in a textbook presentation, working diligently to correct examples of Robert K. Merton's "Matthew effect". Marrying these two objectives, a daunting task for most mere mortals, seems to have been easy for Mark Rubinstein. He notes, "...much of the forgotten truth about the origins of ideas in financial economics is there for all to see, in older books residing on library shelves or in past journals now often available in electronic form [e.g., JSTOR]. Much of the history of investments has only been rewritten by the victors, and can be corrected from primary sources." As a student, and later as a professor and even practitioner, Rubinstein spent untold time poring through countless thousands of documents -- primary material, methodically working his way forward and backward through the more and less famous papers and their citations and references in the literature, in order to learn these ideas for himself. Along the way he contributed quite a bit himself. A gift to us all was his willingness to publish his notes on each of what he deems to be the 180 or so most important contributions to the field. Delineating three periods in the literature as "ancient" (pre-1950), "classical" (1950 - 1980