Financial Economics
This is rather an esoteric branch of economics that deals with financial markets in general. Its major concerns are the efficient allocation and maximum deployment of often scarce resources in an environment of risk and uncertainty. Experts in this area are mainly concerned with 4 major factors that affect a rational decision-making process: time, risks, options available and complete information. In many situations, it is usually very hard to get a grip on all four factors in a meaningful way; hence, decisions are often reached or made on the fly. A manager has to decide even with incomplete information and hopes that he made the right decision under the prevailing circumstances. This type of situation arises in financial markets (such as stock market investing) and the ideal financing mix for a firm (bank borrowing versus equity capital). Financial economics stands on the legs of assumptions, most of which can never be certain in any absolute way. Foremost among them is the efficient market theory or hypothesis which in layman’s terms simply means that all the available current information has been factored into current share prices. But this has been challenged lately by empirical evidence by the new branches of experimental finance and experimental economics. A prime example of this theory being not necessarily correct are the hedge funds which defy market expectations and produce good returns on a consistent basis year in and year out whether the market is in a downturn or not.
Financial Economics
Site Name: The London School of Economics
Domain Name: http://fmg.lse.ac.uk/~antonio/files/fin_eco.pdf
This site gives the lecture notes of a distinguished professor in the renowned business school. All the compilations are in PDF format, so you need to convert the files.
Site Name: Journal of Financial Economics
Domain Name: http://jfe.rochester.edu
This is the site of the Rochester school in New York that published the journal. It also provides annual reports that summarize the developments in this new field.
Site Name: Economics Departments, Institutes and Research Centres
Domain Name: http://edirc.repec.org/finecon.html
This site is maintained by the University of Connecticut. It covers a broad range of highly useful topics such as the links between economics, risks and insurance coverage.