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Books Related to Capital Ideas Peter L. Bernstein - ISBN: 0471731749
Disappointing - Rated
This book is a poor sequel to the 1996 "first instalment" of "Capital Ideas" (which I do consider a great book). Some of the new book's main flaws:
-- repetitive and way too long for what it has to tell. Just one example: The supposedly "revolutionary" concept of "separating alpha from beta" is covered over and over again across several chapters without adding any new insight.
-- often the book is akin to an advertising pamphlet for Goldman Sachs, Morgan Stanley, Barclays Global Investors and I would not be surprised if the chapters on these companies are at least partially copied from their promotion material (that's the way these sections sound anyway). Worse: Not a single empirical proof is supplied for the supposedly market beating "alpha strategies" that these players are practicing so successfully according to the author.
-- the book does not even mention the possibly most important innovation (as far as practical success and application goes) regarding asset pricing models during the last 15 years: The Fama/French 3 and 5 Factor models.
-- it is more than a bit presumptuous and simply silly to call the basic set of the ideas and concepts forming Modern Portfolio Theory "Capital Ideas" as the author does (obviously an attempt to go down into "history" as someone how coined a term.
-- the fact that a large part of MPT is based on the assumption of normally distributed return data when in fact virtually everyone now concedes that that assumption is very often not met in reality gets but a passing footnote.
All in all: A surprisingly weak book and not even well written like most others of Bernstein's works.
Accessible explanation of the foundations of finance - Rated
In the early 1950s, graduate student Harry Markowitz presented his Ph.D. dissertation to the University of Chicago economics department. The response was less than encouraging. "This isn't a dissertation in economics," Milton Friedman told Markowitz. "It's not math, it's not economics, it's not even business administration." Whatever it was, Markowitz's heterodox theory of portfolio selection changed finance forever and earned a Nobel Prize. Financial historian and investment manager Peter L. Bernstein humanizes his saga of great shifts in financial theory by organizing it around eminent thinkers (Markowitz, Myron Scholes, Franco Modigliani, Robert Merton, Bill Sharpe and others, if you ever want to look up a finance guru). Deepening his analysis with insights from "behavioral finance," Bernstein describes how these innovators generated and extended the now-orthodox "capital ideas" of portfolio selection, capital structure, the Capital Asset Pricing Model, the efficient market hypothesis and the Black-Scholes-Merton theory of option pricing. Bernstein's erudition is dazzling, his explanations pellucid and his narrative filled with scintillating characters. getAbstract doesn't need to hedge: you'll find this overview of current finance theory and practice brilliant, even if you don't know your alpha from alfalfa.
