A senior PhD student in finance told me not to spend too much time on textbooks during the summer before the PhD. Instead she highly recommended me to read stories and blogs about economics. So here are my readings with some comments:
A Little History of Economics by Niall Kishtainy
This is a short and easy (i.e. no math) reading on the development of economics’ ideas. I notice that most seminal ideas were pushed by the demand to (re)solve some serious questions or conflicts of the time. A few of them, though arose in our society centuries ago, still persist today (e.g. capitalism vs. socialism). Some contributors to the finance scholarship are mentioned: Markowitz (portfolio selection), Fama (efficient markets), Shiller and Thaler (behavioral finance).
My take-away is that everything around us has its own economics. If you are deep in observing and thinking, then you may pull out some interesting ideas even from seemingly mundane things. I’d suggest to read further Freakonomics by Levitt and Dubner to understand this argument.
There is also another (older) book on the history of economics ( The Wordly Philosophers by Heilbroner) that I read a lot of positive comments about.
A History of the Theory of Investments by Mark Rubinstein
This is a long and hard (i.e. heavy math) reading on the development of investments theory. Rubinstein documented its past in three phases: before 1950, from 1950 to 1980, and after 1980. What I admire about the book is that the author spent significant time to trace root of ideas and their subsequent development, as he often reminded us that the Stigler’s law of eponymy holds even in this science.
I have to admit that I couldn’t understand everything Rubinstein documented, especially the proofs. My expectation was to understanding in what context each idea was born and connecting ideas together. Yet the result came short of that expectation. But I make a promise to get back to the book as a reference in the future when I need to delve deep in some pioneering ideas of financial economics.
It’s also sad to learn that Mark Rubinstein passed away last May. He’ll surely be remembered for his many great contributions to our fields, especially in asset pricing.
The Foolish Corner by John Howe and Robb Corrigan
This is a short book on common behavioral biases that people make in their financial decisions and how they can be avoided. Hedonic adaptation is a new bias I learned from reading this book. I came across the others from reading Thinking, Fast and Slow by Daniel Kahneman and Nudge by Richard Thaler and Sunstein. One of the book’s authors (Prof Howe) is the chair of the finance department that I will be doing my PhD. These books focus more or less on individual biases. If you are interested in understanding how such biases can lead to wide-scale economic disasters, I’d recommend Irrational Exuberance by Robert Shiller.
A Random Walk down Wall Street by Burton Malkiel
I’m still reading this book so I can’t give away much comments. I was skeptical of any book that claims some succesful investments strategies on the cover, but the book appears on reading list of many notable economists (e.g. Greg Mankiw) (and Malkiel is also a respected academic), so I decided to give it a try.
I also spent some time to review (hopefully necessary for the first year) math with:
- Linear Algebra Done Right by Sheldon Axler
- Probability Essentials by Jean Jacod and Philip Protter