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Financial institutions, markets, and economic activity

Author: Campbell, Tim S. Series: McGraw-Hill series in finance Publisher: McGraw-Hill, 1982.Language: EnglishDescription: xviii, 604 p. : Graphs/Ill. ; 24 cm.ISBN: 0070096910Type of document: BookBibliography/Index: Includes bibliographical references and index
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Item type Current location Collection Call number Status Date due
Book Doriot Library
Main Collection
Print HG173 .C27
(Browse shelf)
Book Tanoto Library
Print HG173 .C36 1982
(Browse shelf)

Includes bibliographical references and index


Title: Financial institutions, markets, and economic activity Preface CHAPTER ONE INTRODUCTION The Role of Financial Assets and Markets The Two Principal Functions of Financial Assets / The Two Principal Functions of Financial Markets The Methodology of Financial Economics Positive and Normative Economic Theory / Empirical Methodology Topics Covered in This Book xiii 1 2 5 9 PART I THE VALUE OF ASSETS CHAPTER TWO INTRODUCTION TO THE CONCEPT OF VALUE Income, Value, and Wealth Income / Value / Wealth Types of Wealth Debt / Equities / Tangible Assets / Human Capital / Money Expectations, Markets, and Value Anticipated and Unanticipated Information / Intrinsic and Speculative Value 13 14 20 22 Value Creation and Wealth Transfer Value Creation and Destruction / Wealth Transfers and Property Rights CHAPTER THREE TIME AND THE VALUE OF ASSETS The Concept of the Interest Rate The Interest Rate as a Price I Historical Perspective on the Interest Rate / Some Difficulties in Computing the Interest Rate Introduction to Present Value Four Present Value Problems I Generalizing the Four Problems and the Concept of Annuity Additional Features of Present Value Net Present Value / The Internal Rate of Return / Taking Account of the Frequency of Compounding / Perpetuities Present Value of Bonds and Stocks The Value of a Coupon Bond / Valuing Equity Securities CHAPTER FOUR UNCERTAINTY AND VALUE Some Important Concepts Measuring Risk and Return The Probability Distribution on Returns / Measuring Expected Return / Measuring Risk Conceptualizing the Risk-Return Tradeoff What Do We Do When We Have Measured Risk and Return? / The Role of Personal Preference in Investment Decisions Risk and Return in Portfolios of Assets Measuring the Relationship between Assets / Measuring Portfolio Risk and Return / Choices among Portfolios of Assets CHAPTER FIVE CAPITAL MARKET THEORY Systematic and Unsystematic Risk Individual Assets and the Market Portfolio / Measuring the Systematic Risk of an Asset The Capital Asset Pricing Model (CAPM) Foundation of the CAPM / The Pricing Equation / The Usefulness of the CAPM / Shortcomings of the CAPM CHAPTER SIX VALUE AND THE COST OF INFORMATION The Nature of Information Costs Heterogeneous Expectations and Market Value The Information Production Industry Types of Information Producers / Problems with the Quality of Information Produced 27 33 34 41 46 54 61 62 64 70 76 90 91 99 112 113 114 119 Economies in Information Production and the Role of Specialists Optimal Search / The Role of the Specialist Market Prices and "Efficient" Use of Information The Problem of Asymmetric Information 122 125 129 PART II THE DETERMINANTS OF MARKET INTEREST RATES CHAPTER SEVEN THE DETERMINANTS OF THE REAL INTEREST RATE Fisherian Theory of the Real Rate of Interest Time Preference / Investment Opportunities / Equilibrium with Borrowing and Lending / Market Equilibrium The Real Rate from Another Perspective Equilibrium in a Single Market for Borrowing and Lending / Equilibrium in Primary and Secondary Markets Analyzing the Flow of Funds Financial Statements for Economic Sectors / Sources and Uses of Funds Statements for Economic Sectors / Flow of Funds for the United States in 1977 CHAPTER EIGHT FACTORS AFFECTING NOMINAL INTEREST RATES Measuring and Comparing Nominal Yields Inflation and Nominal Interest Rates The Real and Nominal Rates Defined / Ex Ante and Ex Post Inflation and Real Interest Rates / The Behavior of the Ex Ante Real Rate and the Efficient Markets Hypothesis: Some Unresolved Questions Premiums for Risk and Default Risk Premiums in the Market for Debt Securities / Risk Premiums in the Market for Equity Securities Taxes and the Yields on Securities The Tax Exemption of Municipal-Bond Income / Taxation of Interest and Capital Gains: The Advantage of Discount Bonds The Impact of Relative Security Supplies on Nominal Yields Segmentation Theory / Substitution Theory / Evidence on Segmentation and Substitution CHAPTER NINE THE TERM STRUCTURE OF INTEREST RATES Yield Curves and Forward Rates What Is the Yield Curve? / The Meaning and Computation of Forward Rates Theories of the Term Structure of Interest Rates The Unbiased Expectations Theory / The Segmentation Theory of the Term Structure / The Preferred Habitat Theory of the Term Structure 137 138 148 153 164 165 168 173 180 186 194 195 201 Interest-Rate Forecasts and the Term Structure The Efficient Markets Hypothesis and the Term Structure of Interest Rates / Theories of the Formation of Expectations / The Usefulness of the Yield Curve Innovations in Debt Contracting for Different Maturities The Treasury Bill Futures Market / Floating-Rate Loans 209 215 PART III FINANCIAL MARKETS AND INSTITUTIONS IN THE UNITED STATES CHAPTER TEN THE ORGANIZATION AND STRUCTURE OF FINANCIAL MARKETS Market Organization and the Function of Brokers and Dealers Introduction / The Characteristics of Auction Markets / The Characteristics of Over-the-counter Markets and the Roles of Brokers and Dealers / Primary and Secondary Markets Auction and Over-the-counter Markets in the United States The Primary Treasury Bill Market-Pure Auction / Secondary Markets in Equities-Auction and Over-the-counter Markets / The Money Market-An Over-the-counter Market CHAPTER ELEVEN FINANCIAL INTERMEDIATION The Concept of Intermediation The Services Provided by Financial Intermediaries Risk Reduction through Diversification / Maturity Intermediation / Reduction in the Cost of Contracting / Information Production / Management of the Payments System / Insurance Financial Intermediaries in the United States Economy Types of Financial Intermediaries / The Flow of Funds through Financial Intermediaries / A Closer Look at Commercial Banks Special Issues in Intermediated Markets Valuing Financial Intermediaries / Financial Intermediaries and Liquidity Management CHAPTER TWELVE THE MARKET FOR CONSUMER BORROWING AND LENDING Overview of Consumer Financing The Residential Mortgage Market The Changing Demand for Mortgage Credit I Intermediaries in the Mortgage Financing Industry / The Conventional Mortgage and the Savings and Loan: A Closer Look / Alternative Mortgage Contracts Nonmortgage Consumer Debt Types of Nonmortgage Consumer Debt I Sources and Uses of Installment Debt 225 226 232 246 247 248 256 263 275 276 279 287 Consumer Acquisition of Financial Assets Deposits and Credit Market Instruments / The Advent of Money Market Certificates / Pension Funds, Life Insurance, and Household Participation in the Equity Market CHAPTER THIRTEEN THE MARKET FOR CORPORATE FINANCING Overview of the Sources and Uses of Corporate Financing The Financing Options / The Volume of Alternative Sources of Financing / The Uses of Corporate Financing Internal Funds and Equity Financing Corporate Reliance on Internal Funds / New Equity Financing Corporate Debt Financing Long-Term Debt Financing / Business Financing from Commercial Banks / Alternative Sources of Short-Term Debt Corporate Financing through the Business Cycle: A Look at the 1974 Recession The Pattern of Business Financing over the Business Cycle / The 1974 Recession CHAPTER FOURTEEN THE MARKET FOR GOVERNMENT FINANCING Federal Government Financing The Purpose and Volume of Treasury Financing /Type and Ownership of Treasury Debt / Agency Securities The Markets for Treasury and Agency Securities Pricing of Bills / Pricing of Bonds and Notes I The Market for Treasury Securities / The Market for Agency Securities State and Local Government Financing Characteristics of Municipal Bonds I The Supply and Demand for Municipal Bonds / The Effectiveness of Tax Exemption as a Subsidy for State and Local Governments 289 301 302 307 316 329 333 334 342 350 PART IV REGULATING FINANCIAL MARKETS AND INSTITUTIONS CHAPTER FIFTEEN THE RATIONALE FOR REGULATING FINANCIAL MARKETS An Initial Perspective on Regulation Regulation and the Competitive Marketplace / Natural Monopoly / Externalities / Asymmetric Information / The Motives for Regulating Financial Markets Regulation and Monopoly Power in Financial Markets Sources of Monopoly Power in Financial Markets / Regulation to Promote Competition 365 366 371 Regulation and the Problem of Expropriation Expropriation in Private Contracts / Market Mechanisms to Deal with Expropriation / Regulating the Terms of Contracts Regulation and the Concept of Agency Sources of the Agency Problem / Regulating Agents Regulation to Limit Market Failure CHAPTER SIXTEEN REGULATION OF THE SECURITIES MARKETS Overview of the Regulatory System for Securities Markets The Events Leading Up to the Securities Acts of 1933 and 1934 / The Securities Acts of 1933 and 1934 I Reform of the Securities Markets in the 1970s Promoting Competition in Securities Markets The Impact of Eliminating Minimum Brokerage Commissions / The National Market System Regulating the Distribution of Information Is Disclosure Regulation a Good Thing? / How Much Should We Limit Potential Conflicts of Interest? CHAPTER SEVENTEEN THE REGULATION OF COMMERCIAL BANKS Overview of the Bank Regulation System Banking Regulation through the Great Depression The Underlying Issue: Convertability and Stability / Early Regulation and the Wildcat Banking Era / Reform: The National Banking Act / The Federal Reserve System / The Banking Legislation Spawned by the Depression / The Significance of the Changes in the 1930s Deposit Insurance and Accompanying Regulation Deposit Insurance and Control of Risk / Restrictions on Entry and Expansion / Minimum Capital Requirements The Recent Performance of the Regulatory System The Track Record on Bank Failures and Stability / The Cost in Lost Competition / Pressures for Change in the Regulation of Commercial Banks / The Deregulation Act of 1980 CHAPTER EIGHTEEN REGULATION OF NONBANK FINANCIAL INSTITUTIONS Overview of the Regulation of Nonbank Financial Intermediaries Regulation of Savings and Loans and the Problem of Disintermediation Outline of the Regulatory Structure for Savings and Loans / Problems with the Regulatory Strategy for Savings and Loans Regulation of Other Thrift Institutions The Role of Other Thrift Institutions in the Economy / Regulating the Other Thrifts Pension Funds and Their Regulation The Characteristics of Pension Funds / Regulation of Pension Funds: ERISA 375 379 381 387 388 397 401 414 415 417 427 432 443 444 446 453 459 Insurance Companies and Their Regulation Life Insurance Companies / Property and Casualty Insurance Companies CHAPTER NINETEEN FRACTIONAL RESERVE BANKING AND GOVERNMENT REGULATION OF THE MONEY SUPPLY Alternative Definitions of Money The Function of Money / What Constitutes Money Today? The Operation of the Federal Reserve and Control of the Monetary Base The Organization of Power Within the Federal Reserve / Open Market Operations and Control of the Monetary Base Determinants of the Money Supply The Multiple Expansion Process / Leakages from the Multiple Expansion Process / A Model of the Money Supply Process How Should Monetary Policy be Conducted? The Evolution of Federal Reserve Policy I The Contemporary Debate about the Conduct of Monetary Policy 463 470 471 477 480 487 PART V FINANCIAL MARKETS AND THE AGGREGATE ECONOMY CHAPTER TWENTY HOW FINANCIAL MARKETS AFFECT THE ECONOMY: THE MONETARIST APPROACH 499 500 501 A Perspective on the Monetarist-Keynesian Debate The Demand for Real Money Balances Specifying the Demand for Money / Real versus Nominal Money Demand The Modern Quantity Theory The Concept of Velocity and the Modern Quantity Theory I Is Velocity Stable and Predictable? Cause and Effect in the Monetarist Theory: The Portfolio Adjustment Process The Portfolio-Adjustment Process / Testing the Monetarist View / Rational Expectations and the Monetarist View The Monetarist Prescription for the Conduct of Monetary Policy CHAPTER TWENTY-ONE HOW FINANCIAL DECISIONS AFFECT THE ECONOMY: THE KEYNESIAN APPROACH An Overview The Short-Term Impact of Monetary Policy on Interest Rates: The Liquidity Effect Monetary Policy and the Short-Term Interest Rate: Equilibrium between Money Supply and Money Demand / The Money Supply and the Loanable-Funds Market / Which Short-Term Interest Rate? / Monetary Policy and the Cost of Capital 506 512 517 525 526 527 The Equilibrium Real Interest Rate and the Level of Income The Cost of Capital and Investment Demand / Equilibrium Investment and Saving A Synthesis of the Differences between the Keynesian and Monetarist Views Segmentation and the Monetarist-Keynesian Controversy / Real and Nominal Interest Rates Revisited CHAPTER TWENTY-TWO MONETARY POLICY, FINANCIAL MARKETS, AND INFLATION Wealth Redistributions Due to Inflation Wealth Redistribution Created by Unanticipated Inflation / Inflation as a Tax / Common Stock as an Inflation Hedge Why Do We Have Inflation? The Monetary Explanation of Inflation / The Cost-Push Explanation of Inflation / The Elusive "True" Cause of Inflation / Can Inflation be Stopped with Monetary Policy? CHAPTER TWENTY-THREE CONCLUSION Part I: The Value of Assets What We Have Learned / Important Unanswered Questions Part II: The Determinants of Market Interest Rates What We Have Learned / Important Unanswered Questions Part 111: Financial Markets and Institutions in the United States What We Have Learned / Important Unanswered Questions Part IV: Regulating Financial Markets and Institutions What We Have Learned /Important Unanswered Questions Part V : Financial Markets and the Aggregate Economy What We Have Learned / Important Unanswered Questions Appendix Present Value Tables Index 536 541 549 551 560 572 573 574 576 578 580 583 590

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