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Rating: 
Summary: Beyond the cookbook
Review: *Puzzles of Finance* has attracted a rather ecclectic group of reviews. I won't repeat what others have wrote and the book's own descriptions in my own review. I will, however, briefly discuss why I am giving it 5 stars.As someone who is interested in mathematics for the sake of mathematics rather than for purely pecuniary purposes, it bothers me that many finance books treat the required level of mathematics in everything ranging from simple discounting formulae all the way up to stochastic differential equations in a cookbook manner. What I mean by that is that almost all of the books out there in finance that has some legitimate math component in it (I leave out pop investing books that are akin to vodoo) ignore both the logic and mathematical 'beauty' underlying the math of finance. Even Springer-Verlag-style books on advanced financial engineering / econophysics / whatever-you-want-to-call-it often commit these sins. Mark Kritzman's book is one of the handful that I am aware of on any level of mathematics that does not commit such sins. As for the chap that wants to hash out some debate over the utility of utility theory: All I can say is that this is hardly the forum for that discussion. At any rate, Mark Kritzman's mathematical musings are a lot more appealing than the type of blind empricism that some so-called quants engage in. *Puzzles of Finance* is one of the few books that doesn't lose sight of the mathematical logic/beauty from the forest of cookbook pseudo-quant wizardry.
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Summary: A great read.
Review: Entertaining AND informative. This book presents 6 puzzles of finance and their solutions in a clear, concise, and interesting way. A very unique and engaging book that I'd recommend to anyone.
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Summary: Great for the finance novice
Review: I found the author's linkage between Einstein and options interesting, but was disappointed by much of the rest. The book does cover some counter-intuitive aspects of economic behavior, but the big puzzles like 'why do I invest at tops and sell at bottoms?' don't come up. Additionally, the book never links the various subject material into a unified perspective.
Rating: 
Summary: Of limited interest
Review: The puzzles in the book are of little practical value. If you have much previous reading in finance you would already be aware of these issues. You may also find the tone of the book annoying - "look how clever I am". Like most of finance, the math is not very interesting in itself, nor is it very accurate in describing the real world e.g. the Black-Scholes option pricing model. If you are reasonably good at math and know little or nothing about finance you may enjoy the book. Otherwise a standard text on investment management would be better.
Rating:
Summary: Beyond the cookbook
Review: The puzzles in the book are of little practical value. If you have much previous reading in finance you would already be aware of these issues. You may also find the tone of the book annoying - "look how clever I am". Like most of finance, the math is not very interesting in itself, nor is it very accurate in describing the real world e.g. the Black-Scholes option pricing model. If you are reasonably good at math and know little or nothing about finance you may enjoy the book. Otherwise a standard text on investment management would be better.
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Summary: Not very practicable in spite of the title
Review: This is not a very useful book, in my opinion. The puzzles can be interesting for some people, but I found it quite dull. Some people may find them clever and 'neat' but I don't think most people will be pleased by the book. Some of the puzzles are 'old hat' to anyone who has done much reading on finance eg option pricing.
Rating: 
Summary: Entertaining..
Review: This small, entertaining monograph can be read superficially in a sitting and provides food for thought. It would be interesting and useful for econophysicists to try to find alternative solutions to several of the first five puzzles not based on either expected utility or 'equilibrium' arguments. Kritzman prefaces the book by stating that he will not address either the equity premium or dividend puzzle because these two problems depend on agents' psychology. He addresses instead 6 puzzles that he calls purely logical and mathematical. However, he contradicts himself in that several of the solutions depend on utility functions and therfore on agents' psychology. His background is that of money manager. Siegel's Paradox is based on the fact that the average of a random variable differs from the inverse of the average of the same variable. He applies this to exchange rates with the question whether the difference is economically relevant. In Liklihood of Loss the nonuniqueness of liklihood of loss is discussed. The result is used to criticize the idea of using social security funds to place bets in the stock market. Lognormal returns, which are incorrect especially for large returns, are assumed throughout the book. In Time Diversification he addresses the interesting question whether agents should be more risk-tolerant with long rather than short time horizons. The conventional wisdom assumes the former, but he discusses a solution by Samuelson that contradicts this viewpoint. Samuelson's solution is, of course, based on an expected utility, which is arbitrary. Why the Expected Return is Not to be Expected. Kritzman argues that the expected return has less than 50% probability of occuring. Half the Stocks All the Time or All the Stocks Half the Time? Should an agent switch or balance? The balanced strategy has lower risk. Again, expected utility is referred to, but this time after the fact. The Irrelevance of the Expected Return for Option Valuation. This chapter extols the use of the riskless return in the delta hedge strategy, an idea much beloved of theorists and ignored by traders. In this chapter, I am irritated that everyone under the sun (including Einstein and Wiener) gets credit for the background necessary for the Black-Scholes equation while Osborne, who introduced the lognormal distribution into finance in 1958, is completely ignored. The main point, however, is that the famous (anti-) arbitrage argument leading to a riskless hedge is wrong on two counts {1}, another example of how the economists' 'equilibrium' idea does not apply to reality. As we point out in our new stochastic theory of returns, volatility and option pricing, why would a trader go to the trouble to construct a complicated hedge that must be updated continually only to get the same return he'd get by letting his money rest in a CD or money market fund? Clearly, such a trader would not be intelligent. Credit is given incorrectly to Einstein for his solution of a heat transfer problem whereas in reality all that was/is needed in order to solve the Black-Scholes equation (after a simple transformation) is the Green function for the diffusion equaion written down by Einstein, Bachelier and others. Also repeated is the irritating claim that CAPM is an 'equilibrium' model, which it patently is not {1}. References 1. J. L. McCauley and Gemunu H. Gunaratne, An Empirical Model for Volatility of Returns and Option Pricing, submitted (2002).
Rating:
Summary: "Delight and Instruct" - Samuel Johnson
Review: What the critic Samuel Johnson required of literature in the 18th century Mark Kritzman provides here. This book has fundamentally changed the way I look at my portfolio and at the business pages of the paper. (One example: in a single lucid paragraph which is only an illustrative side note to his discussion, Kritzman focuses the entire debate over the privatization of Social Security). His book has also fundamentally changed the way I view investment advice. Kritzman's writing is clear and entertaining and the book is (1) great fun to read and to follow into the solutions of the puzzles and (2) a fund of odd facts you never knew but are glad you know now (see the connection between Einstein and options). It's accessible to the educated layman (I'm an antitrust lawyer), and you don't need calculus. It gets my personal top award -- a second reading.
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