Finance is the academic discipline explaining and studying firms’ investment decisions, how these investments are financed, and how the investors allocate their funds among different projects – with uncertain future dividend streams. The firms’ investment and financing decisions and the investors’ portfolio decisions are closely connected since all of them depend on the prices of the financing contracts, which are determined in a simultaneous general equilibrium.
It is important to understand the relation between the optimal outcome of the theoretical (normative) models and the empirically observed behaviour. The amount of data available to study this relation is enormous. Especially the Scandinavian countries have been very early in implementing computerized registers of the real‐time full history of all individuals’ portfolio holdings, income, job situation, tax payments, health etc. This data is (so far) an unexploited research resource. In addition, most of the trading of the financing contracts is now electronically available, which has created registers of real‐time full history of high‐frequency transactions data. The empirical research on these data has created a whole new discipline called market micro structure.