It is the better developed theory that, in my humble opinion, differentiates Finance from accounting.
When I started my doctoral program way back in the early seventies, finance was in its infancy. I remember taking my first doctoral finance seminar where the textbook was "The Theory of Finance" by Fama and Miller. The first part of the book (which is essentially elementary micro-economics with the time variable thrown in) was very beautifully organised, but the second part where stochasticity in finance is added in, was vague, far too tentative, and thoroughly disorganised; the book essentially fell apart towards the end. At least it felt that way to me since I had arrived with a whole load of courses in probability theory and stochastic processes. Finance theory then was just being refined, and Fama/Miller text had made a premature entrance. (I think Fama would have done better if only he had listened more carefully to his illustrious dissertation adviser, the late Benoit Mandelbrot).
Then for twenty years I had virtually no interaction with Finance until I was asked to teach a graduate course in Accounting Theory. A Finance colleague asked me to take a look at Luenberger's book on Investment Science (as the title suggests, it deals with only one aspect of finance). I found the book fascinating. Somewhere along the way, Finance had found itself. That can not happen without good theory.
Unfortunately, accounting, in my opinion, has yet to find its moment of epiphany. Until then, we all will be plodding along, pretending that we have a good understanding of our domain.
When I started my doctoral program way back in the early seventies, finance was in its infancy. I remember taking my first doctoral finance seminar where the textbook was "The Theory of Finance" by Fama and Miller. The first part of the book (which is essentially elementary micro-economics with the time variable thrown in) was very beautifully organised, but the second part where stochasticity in finance is added in, was vague, far too tentative, and thoroughly disorganised; the book essentially fell apart towards the end. At least it felt that way to me since I had arrived with a whole load of courses in probability theory and stochastic processes. Finance theory then was just being refined, and Fama/Miller text had made a premature entrance. (I think Fama would have done better if only he had listened more carefully to his illustrious dissertation adviser, the late Benoit Mandelbrot).
Then for twenty years I had virtually no interaction with Finance until I was asked to teach a graduate course in Accounting Theory. A Finance colleague asked me to take a look at Luenberger's book on Investment Science (as the title suggests, it deals with only one aspect of finance). I found the book fascinating. Somewhere along the way, Finance had found itself. That can not happen without good theory.
Unfortunately, accounting, in my opinion, has yet to find its moment of epiphany. Until then, we all will be plodding along, pretending that we have a good understanding of our domain.
No comments:
Post a Comment