> > From Richard A Brealey and Stewart C Myers, Principles of Corporate
> > Finance, Fourth Edition (McGraw-Hill, 1991), p. 60. Maybe there's a
> > new edition that's gotten more in touch with the New Era. Their use
> > of DEC as a growth stock example is pretty sobering.
>
>I went to Amazon to check out this book. Thought this review was
>interesting (and there are three or four more on the site like this):
>
>Why do investment bankers on the Street love this book? Simple---it makes
>their lightweight discipline look like rocket science, especially if you're
>unitiated.
It's a textbook on financial theory. Myers edits, or used to, the Journal of Finance, where lots of this stuff was originally presented. There's a whole discipline, lots of it absurd for sure, behind the textbook. It exists, it's influential, and if you're gunning after contemporary capitalism, it helps to understand it.
I got the book because I was told it's pretty standard business school fare, and I wanted to see what MBAs of the future were being told.
> The structure of the book is tortuous and confusing, there is no
>mention of CAPM or Arbitrage Pricing Theory,
Eh? CAPM gets 8 or 9 pages, starting on p. 161; arbitrage pricing theory gets two pages, starting on p. 169, and the two models are compared on pp. 171-173.
> precious little attention to
>statistics, and the authors' idiosyncratic (and unfunny) sense of humor.
I thought the book was kind of funny in places, but maybe I'm unfunny too.
> For
>those who want a thorough, simple introduction, get Ross/Westerfield/Jaffe's
>fine Corporate Finance; for those who want to get their hands dirty, try any
>of Damodaran's books or Bodie/Kane/Marcus Investments. Frankly, finance
>should be about making money---not wading through this kind of garbage.
The people who read this read it as preparation for a career of moneymaking. Bankers, portfolio managers, and corporate finance officers use these techniques every hour of every day. Real investment decisions are made on the basis of these financial models.
>Rocket science without statistics? How could it be?
Dunno, but Principles of Corp Finance is chock full of stats and formulas.
Doug