The History of Finance
Below are 10 topics from the reading followed by an alphabetical list of terms. Write the
letter of the most relevant term next to each topic.
Two strands of finance
Telling the brewer how to make beer
Big bang of finance
Develops the idea of the "market portfolio" and all assets valued using a linear function of
a single economy wide risk factor called "beta"
The idea that no simple rule based on published and available information can generate
above normal rates of return
The arbitrage-based argument that the value of a firm is not affected by its choice between
debt and equity financing
Explains how options and derivative products "complete" the market
Merton Miller's recommended area for further research
Merton Miller's recommended areas to avoid
Name of a European stock exchange
Possible answers. Used at most once. Some are not used at all.
A Adam Smith and the Wealth of Nations (1776)
B Asset pricing and corporate finance
C Asset pricing, agency theory, and behavioral finance
D Crypto-currency
E Deutsche Termin Borse (Euronext)
F Electronic and high frequency trading
G Eugene Fama and the Efficient Markets Hypothesis
H Markowitz and the theory of portfolio selection (1952)
I Structure of a stock exchange
J Micro-normative
K Modigliani-Miller Propositions
L Options and volatility
M Robert Merton, Myron Scholes, and Fischer Black
N William Sharpe and the Capital Asset Pricing Model