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| Capital Ideas Evolving | 
 enlarge | Author: Peter L. Bernstein
Publisher: Wiley
Category: Book
List Price: $29.95
Buy New: $16.66
You Save: $13.29 (44%)
New (39) Used (12) Collectible (1) from $16.53
Avg. Customer Rating:  9 reviews
Sales Rank: 13362
Media: Hardcover
Edition: 2nd
Number Of Items: 1
Pages: 304
Shipping Weight (lbs): 1
Dimensions (in): 9.1 x 6.1 x 1.1
ISBN: 0471731730
Dewey Decimal Number: 658.15
EAN: 9780471731733
ASIN: 0471731730
Publication Date: May 4, 2007
Availability: Usually ships in 1-2 business days
Condition: BRAND NEW
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Product Description
"A lot has happened in the financial markets since 1992, when Peter Bernstein wrote his seminal Capital Ideas. Happily, Peter has taken up his facile pen again to describe these changes, a virtual revolution in the practice of investing that relies heavily on complex mathematics, derivatives, hedging, and hyperactive trading. This fine and eminently readable book is unlikely to be surpassed as the definitive chronicle of a truly historic era."
- John C. Bogle, founder of The Vanguard Group and author, The Little Book of Common Sense Investing
"Just as Dante could not have understood or survived the perils of the Inferno without Virgil to guide him, investors today need Peter Bernstein to help find their way across dark and shifting ground. No one alive understands Wall Street's intellectual history better, and that makes Bernstein our best and wisest guide to the future. He is the only person who could have written this book; thank goodness he did."
- Jason Zweig, Investing Columnist, Money magazine
"Another must-read from Peter Bernstein! This well-written and thought-provoking book provides valuable insights on how key finance theories have evolved from their ivory tower formulation to profitable application by portfolio managers. This book will certainly be read with keen interest by, and undoubtedly influence, a wide range of participants in international finance."
- Dr. Mohamed A. El-Erian, President and CEO of Harvard Management Company, Deputy Treasurer of Harvard University, and member of the faculty of the Harvard Business School
"Reading Capital Ideas Evolving is an experience not to be missed. Peter Bernstein's knowledge of the principal characters-the giants in the development of investment theory and practice-brings this subject to life."
- Linda B. Strumpf, Vice President and Chief Investment Officer, The Ford Foundation
"With great clarity, Peter Bernstein introduces us to the insights of investment giants, and explains how they transformed financial theory into portfolio practice. This is not just a tale of money and models; it is a fascinating and contemporary story about people and the power of their ideas."
- Elroy Dimson, BGI Professor of Investment Management, London Business School
"Capital Ideas Evolving provides us with a unique appreciation for the pervasive impact that the theory of modern finance has had on the development of our capital markets. Peter Bernstein once again has produced a masterpiece that is must reading for practitioners, educators and students of finance."
- Andre F. Perold, Professor of Finance, Harvard Business School
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| Customer Reviews: Read 4 more reviews...
 It's the uncertainty versus risk problem all over again-2.5 stars May 18, 2007
162 out of 189 found this review helpful
Bernstein still is not able( or willing) to carefully weigh the additional historical and empirical evidence that has been presented since 1996,when his " Against the Gods " appeared,concerning the reliance of " modern " finance theory on the assumption that price changes in all financial markets can be modeled on the normal distribution.Nowhere , in his previous books or in this book, is there any report of any economist/econometrician/financial analyst doing any basic goodness of fit test on the time series data from financial markets showing that it fits the normal distribution.
Bernstein seems to be unaware that Benoit Mandelbrot(Mandelbrot appears not to have been mentioned anywhere in the book) has demonstrated time and again, for well over fifty years, that the data DOES NOT fit the normal distribution.If all of the goodness of fit tests demonstrate that the time series data does not fit the normal distribution but the cauchy distribution,what scientific defense can be provided to support the continued use of (a)the mean-variance model,(b)the Beta model,or (c)the Black-Scholes model ? The problem that Bernstein,and the financial analysts he supports, faces is the same problem faced by the Ptolemaic astronomers at the beginning of the 17th century when confronted publicly by Galileo .They successfully silenced Galileo in the short run but were simply destroyed intellectually in the long run as it became increasingly apparent,even to the average citizen, that the earth was not the center of the Universe,that there was no such thing as retrograde movements by the stars,and that the sun did not revolve around the earth but the earth around the sun.Apparently,Bernstein believes that the main conclusion that follows from the application of the normal distribution in portfolio analysis,that diversification of one's portfolio is the rational way to reduce risk,is so important to maintain that it is worthwhile to continue to analyze financial market price movements " as if " they were normally distributed even if all of the evidence shows this to be false.This is not the case.Many centuries before the normal distribution came to be the foundation of portfolio analysis,decision makers had been relying on the old adage that it was unwise to put all your eggs in one basket.One does not need to rely on a theoretically false characterization of price movements to come to the conclusion that diversification is a wise choice for the average investor who lacks the time,training,and experience to emulate Warren Buffet or John Maynard Keynes.
Bernstein appears to be unaware that this issue, of correctly modeling the financial markets, is not a new one.There appears to be very little difference ,at least to this reviewer,between the current controversy that Bernstein ascribes to the "new behavioral finance school"(Shiller-Tversky-Kahneman) and the 1939-40 debate between Keynes and Jan Tinbergen in the pages of the Econmic Journal concerning Tinbergen's belief that he could use the method of a least squares(ordinary least squares)based multiple correlation and regression analysis to predict turning points in the business cycle by analyzing changes in the demand for investment and expectations.Keynes pointed out to Tinbergen that, due to technological change,advance(decay /obsolescence),innovation, and constant changes in expectations of the future,the time series data would not be "...uniform,stable,constant,or homogeneous" over time.The mechanism or propagation machine,which can be represented by some type of probability distribution,generating the time series data would be changing over time.Keynes politely asked Tinbergen to apply some type of goodness of fit test to establish the dynamic stability of the time series(Keynes,in his 1921 A Treatise on Probability,suggested the Lexis-Q test in chapter 33).Tinbergen never supplied Keynes,or anyone else in his life time,with any goodness of fit test.This is certainly a strange reaction from an individual who liked to call himself an economic scientist.
Bernstein is a very good writer.This book is well written.Unfortunately,Bernstein has chosen to serve up " more of the same " type of exposition that was acceptable in his earlier works but now simply begs the question.Bernstein appears to be unable to consider the possibility that advocating the mean -variance approach, when all the statistical evidence shows that the distributions are not close to being normal,is not just unscientific but anti scientific.
Finally, there are a number of important contributors to the risk versus uncertainty debate that are either not mentioned or mentioned in one liners.I find it incredible that the work of D. Ellsberg on ambiguity is omitted.Frank Knight's views on the primacy of dealing effectively with the uncertainty,as opposed to the riskiness ,of the future appears not to have been discussed.Joseph Schumpeter's views on the impact of uncertainty on the business cycle ,and the inapplicability of relying on a normal distribution, due to the "regular irregularity"of technological change over time that is not predictable, are not mentioned.Keynes is given a few irrelevant one line comments in the introductory pages of the book.Mandelbrot's work is not discussed or mentioned.Taleb's work is not covered.Bernstein attempts to fill this gap by substituting Shiller,Lo,Tversky,and Kahneman.However,long before Shiller,Lo,Tversky,and Kahneman were born,Keynes and Knight were discussing these problems in great detail in their books, simultaneously published in 1921, A Treatise on Probability and Risk,Uncertainty,and Profit.
 The Theory and Practice of Finance in the nutshell January 1, 2007
15 out of 30 found this review helpful
This is a required book for any student of finance. It captures all the essence of finance theory in the most intuitive fashion. The very special treat of this book is the ending chapters: how people on Wall Street apply the theory to the real world--and how they make money.
I would assign this book for any finance major student.
If you read this book and would like to see exactly and in more technical details what Bernstein is talking in this book, try these two books:
(i) The Theory of Business Finance: A Book of Readings (Hardcover)
by Stephen H. Archer (Author) and
(ii) Modern Developments in Investment Management: A Book of Readings (Paperback)
by James H. Lorie (Compiler)
They are compilations of the original papers published by those founders of modern finance.
Buy these used, out of print, and old books (yet they are a pilar of what Wall Street has been built on). They are cheap in price but invaluatble in values.
Demystifies investing and the stock market December 5, 2006
10 out of 26 found this review helpful
This is a very well written book which looks at the stock market from a statistical and empirical perspective. It presents overwhelming scientific evidence that it is very unlikely that stock picking adds any value. He presents very interesting evidence that mutual fund managers and portfolio managers of actively managed portfolios on average do not earn their fees.
Despite this clear evidence the asset management industry continues to grow and flourish. This book taught me to manage my own money and to seek to reduce fees to the bare minimum. If more people understood this basic message they would get better returns on their hard earned money.
Accessible explanation of the foundations of finance August 2, 2007
10 out of 15 found this review helpful
In the early 1950s, graduate student Harry Markowitz presented his Ph.D. dissertation to the University of Chicago economics department. The response was less than encouraging. "This isn't a dissertation in economics," Milton Friedman told Markowitz. "It's not math, it's not economics, it's not even business administration." Whatever it was, Markowitz's heterodox theory of portfolio selection changed finance forever and earned a Nobel Prize. Financial historian and investment manager Peter L. Bernstein humanizes his saga of great shifts in financial theory by organizing it around eminent thinkers (Markowitz, Myron Scholes, Franco Modigliani, Robert Merton, Bill Sharpe and others, if you ever want to look up a finance guru). Deepening his analysis with insights from "behavioral finance," Bernstein describes how these innovators generated and extended the now-orthodox "capital ideas" of portfolio selection, capital structure, the Capital Asset Pricing Model, the efficient market hypothesis and the Black-Scholes-Merton theory of option pricing. Bernstein's erudition is dazzling, his explanations pellucid and his narrative filled with scintillating characters. getAbstract doesn't need to hedge: you'll find this overview of current finance theory and practice brilliant, even if you don't know your alpha from alfalfa.
 Ludicrous August 21, 2007
7 out of 14 found this review helpful
Maybe this is a great intro to classic theory, but then there is something wrong with classical thinking.
My one-star rating is for his "forgiveness" of the Long Term Capital Management gang, since no one could have predicted what actually happened.
LTCM managers (inducing Merton and Sholes, subjects of chapters) had excessive confidence in models based on theories that have not been even come close to being validated.
It is ironic that Amazon pairs this book with "The Black Swan" in their "Buy Two" promotion since Bernstein has clearly been "fooled by randomness".
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