The econometrics of financial markets

TLDR: In this paper, Campbell, Lo, and MacKinlay present an attempt by three well-known and well-respected scholars to fill an acknowledged void in the empirical finance literature, a text covering the burgeoning field of empirical finance.

Abstract: This book is an ambitious effort by three well-known and well-respected scholars to fill an acknowledged void in the literature—a text covering the burgeoning field of empirical finance. As the authors note in the preface, there are several excellent books covering financial theory at a level suitable for a Ph.D. class or as a reference for academics and practitioners, but there is little or nothing similar that covers econometric methods and applications. Perhaps the closest existing text is the recent addition to the Wiley Series in Financial and Quantitative Analysis. written by Cuthbertson (1996). The major difference between the books is that Cuthbertson focuses exclusively on asset pricing in the stock, bond, and foreign exchange markets, whereas Campbell, Lo, and MacKinlay (henceforth CLM) consider empirical applications throughout the field of finance, including corporate finance, derivatives markets, and market microstructure. The level of anticipation preceding publication can be partly measured by the fact that at least three reviews (including this one) have appeared since the book arrived. Moreover, in their reviews, both Harvey (1998) and Tiso (1998) comment on the need for such a text, a sentiment that has been echoed by numerous finance academics.