Freshman and Sophomore Programs

A Random Walk Down Wall Street Instructor(s): John Shoven Prerequisites: Economics 1A or equivalent. 1B is desirable, but not required.
The title of this course is the title of one of the books that will be required summer reading. The course will introduce modern finance theory and will cover a wide range of financial instruments: stocks, bonds, options, mutual funds, exchangetraded funds, etc. Historical returns on different asset classes will be examined. The efficient market hypothesis and the case for and against index funds will be discussed. The course for 2009 will differ from earlier versions of the course in that we will discuss the collapse of the investment banks, the unprecedented actions of the Federal Reserve and the Treasury to strengthen the banking system, and the ongoing course of the economic recession. We will try to reconcile the long-run return on stocks, bonds, and money market instruments with the capital asset pricing model. We will talk with venture capitalists, former Federal Reserve and Treasury officials, mutual fund managers, and those who manage large institutional endowments. Students will be expected to write a short paper and make an oral presentation to the class. A wide range of topics will be acceptable, including market regulation, the introduction of new financial instruments, the functioning of commodity futures markets, and evaluations of the federal government intervention in financial markets.

John B. Shoven is the Charles R. Schwab Professor of Economics and the Wallace R. Hawley Director of the Stanford Institute for Economic Policy Research. He is a former dean of the School of Humanities and Sciences. He received his B.A. in physics at UC–San Diego and his Ph.D. in economics at Yale. He has published over 100 articles and written or edited 20 books. He received the Dean’s Award for Distinguished Teaching in 2003. He is also chairman of the board of Cadence Design Systems and on the boards of American Century Funds and Exponent, Inc.