Importance Of Financial Economics

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Financial Economics: an Introduction
Financial Economics is the branch of Economics that analyses the use and distribution of resources in markets by taking into account the interrelationship of financial variables such as prices, interest rates and shares. Financial economic decisions are usually made in an uncertain environment by evaluating how time, risk, opportunity costs and information can create incentives and disincentives.
In this context, the field of Finance acts like an economic time machine, helping savers transport today’s surplus income into the future or giving borrowers access to future earnings now. It also acts like a safety net, insuring against possible calamities in the future.
Financial Economic Thought
Theories, assumptions
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According to Poitras (2000) the late fifteenth century is the starting point for the early or pre-classical history of financial economics, which is more than three centuries prior to the publication of the Wealth of Nations by Adam Smith. From that time onwards, Financial Economic Thought has been nurtured under many influences and this is a field in which theory and practice appears to have co-evolved quite closely; for example theories of market efficiency has been shaped and has helped to shape actual market behaviour.
The study of Financial Economics is closely linked to Economic Thought and the fields of Accounting and Finance. In this paper, it will be analyzed how the fields of Economics, Accounting and Finance and their interrelationships have contributed to the development of Financial Economic
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The functions of Accounting can be of fivefold: recording, classifying, summarizing, analyzing and interpreting and communicating and its specific functions include stewardship of wealth through systems and controls of accounting, measurement of performance through interpretation of recorded data and independent attestation of values and these functions has contributed to the Financial Economic Theory since they form the basis for making future investment decisions and analyzing the present position of a
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