Preface to the Annual Review of Financial Economics

Posted: 3 Jun 2010

See all articles by Andrew W. Lo

Andrew W. Lo

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER); Massachusetts Institute of Technology (MIT) - Computer Science and Artificial Intelligence Laboratory (CSAIL)

Robert C. Merton

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER); Harvard Business School - Finance Unit

Date Written: December 2009

Abstract

It is surely a coming of age for financial economics that the field is now covered by Annual Reviews, a not-for-profit organization that has been providing the scientific community with authoritative critical reviews of the most important scholarly advances since 1932, starting with the Annual Review of Biochemistry. Annual Reviews now covers 40 disciplines ranging from analytical chemistry to sociology, and it has been our pleasure and privilege to serve as editors for this inaugural volume of the Annual Review of Financial Economics. One of the most exciting aspects of this discipline is the constant interplay between theory and practice that is unique among the social sciences. Despite its use of rather arcane mathematics, and unlike other mathematically sophisticated branches of economics, financial economics has found its way into the mainstream of financial practice. It was not always thus. The scientific breakthroughs in financial modeling both shaped and were shaped by the extraordinary flow of financial innovation that coincided with revolutionary changes in the structure of world financial markets and institutions during the past four decades. In this preface, we provide some personal reflections - meant neither to be authoritative nor exhaustive - on the origins of financial economics, where the field stands today, and what the future might hold.

Suggested Citation

Lo, Andrew W. and Merton, Robert C., Preface to the Annual Review of Financial Economics (December 2009). Annual Review of Financial Economics, Vol. 1, pp. 01-17, 2009. Available at SSRN: https://ssrn.com/abstract=1599431 or http://dx.doi.org/10.1146/annurev-financial-071808-145225

Andrew W. Lo (Contact Author)

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Massachusetts Institute of Technology (MIT) - Computer Science and Artificial Intelligence Laboratory (CSAIL)

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Robert C. Merton

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National Bureau of Economic Research (NBER)

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