There has been a recent spate of students asking me for advice on how to “invest” their extra money. My initial reaction has generally been “in a better hair cut,” but it is probably also useful to tell them how economists think about what’s going on in the equities and securities markets.
So, in that spirit, here are a couple of introductory readings that I would recommend, all available in The Mudd or free online:
Steven Landsburg, “Random Walks and Stock Market Prices: A Primer for Investors,” in The Armchair Economist (initial publication in 1993, updated “for the 21st century” in 2012).
Burton Malkiel, A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing (most recent edition in 2007).
Burton Malkiel, “The Efficient Market Hypothesis and Its Critics,” Journal of Economic Perspectives, 17(1):59-82
Robert J. Shiller “From Efficient Markets Theory to Behavioral Finance,” Journal of Economic Perspectives, 17(1): 83–104.
Again, these are simply very good accounts of how mainstream economists view the financial world, so this is not an endorsement of any particular investment strategy and shouldn’t be taken as investment advice.
Unless it works, in which case by all means I’m happy to take credit.