PhD Finance vs. PhD Econ vs. PhD Stat ???

[quinn]

Ok. So I want to study something along the lines of financial econometrics and time series econometrics... something of the like at least. But I don't know which PhD program to apply to.

 

I could do an Econ PhD, but virtually all the required cores besides econometrics would be useless/uninteresting for me.

 

I could do a Finance PhD, in which case I would love the empirical finance, but would not be so excited about the required finance theory courses.

 

Or I could do a PhD in Stats and take a bunch of theoretical statistics (which I like more or less) including some econometrics related classes from either the econ dept or b-school, but I don't think I would get as much exposure to empirical finance as I would like.

 

I wouldn't mind doing either of these PhDs, but I need help decided which would be best for me. So, how do they compare in competitiveness for admission (in general)? How do they usually compare in funding? What are some other things I should be considering?

 

I appreciate any help. Thanks in advance!

[rhuelu]

I would say your best bet is to either find an econometrics program (I think Chicago has one, for instance) or a stats program located in a bschool (Wharton has one, columbia might too). I think that these programs would best suite your interests, and they are def easier to get into than the finance programs at these schools.

[Prawler]

PhD Finance has the most generous funding and harsh admission process.

[brook1]

economics, statistics and finance are some how related subjects. all the three papers are studied by management peoples.

 

---------

Brook

 

SreeVysh Corp

[dzilla]

Modern 'metrics is heavily guided by theory in most fields of economics and finance so I think the theory courses would serve anyone mainly interested in empirical stuff well.

[Prawler]

I am in PhD Finance and I can ensure you that you need these courses in order to do empirical research and in order to understand most of the papers.

[Hocking]

You will find that most Finance PhD Programs simply give their first year students to the Economics Department to take a full year of Econometrics, Micro Theory, and sometimes even Macro Theory. So, if all you want is the Econometrics in an Economics PhD Program, you could get that by getting into a Finance PhD Program. Getting into a Finance PhD Program is much more difficult than getting into an Economics PhD Program, so this is the draw back.

 

Furthermore, when most Economics and Finance Professors are asked the difference between a Finance PhD vs. an Economics PhD, they usually say "50%". Meaning you will earn about 50% more money per year with a Finance PhD degree than you will earn with an Economics PhD degree. You will also have about 5 times more job opportunities upon graduating. Something to consider if you are torn between these two programs.

[Galoisj]

You are too biased I should say

the data you gave are somewhat exaggerated

And for econ phd,you can always try to find jobs in bschools

 

Here are the placements of harvard econ phds

Harvard Econ Department - Placement Information

Many graduates went to school of business

 

 

You will find that most Finance PhD Programs simply give their first year students to the Economics Department to take a full year of Econometrics, Micro Theory, and sometimes even Macro Theory. So, if all you want is the Econometrics in an Economics PhD Program, you could get that by getting into a Finance PhD Program. Getting into a Finance PhD Program is much more difficult than getting into an Economics PhD Program, so this is the draw back.

 

Furthermore, when most Economics and Finance Professors are asked the difference between a Finance PhD vs. an Economics PhD, they usually say "50%". Meaning you will earn about 50% more money per year with a Finance PhD degree than you will earn with an Economics PhD degree. You will also have about 5 times more job opportunities upon graduating. Something to consider if you are torn between these two programs.

[igotshoe]

harvard is clearly not the norm, and there is no sense in using the outlier as a representation of the degree as a whole.

[Hocking]

Your statistics concerning Harvard are probably right, but that is not representative at all of most schools. If you get a PhD in Economics from Harvard, Princeton, ect....., then you will have plenty of job opportunities. You could also land a job in some business colleges (not all). For the other 99% of us who go to lower ranked schools, this would not be the case.

 

It is a well known fact (if you don't believe me ask any Economics Professor or Finance Professor), Finance PhD's are paid roughly 50% more than Economics PhD's. It is also well known (again, if you don't believe me ask any Economics or Finance Professor) that the job market for Finance PhD's is far better relative to Economics PhD's. It is very common for Finance Tenure track jobs to go unfilled. This is never the case in Economics. There are Economists who can not find an academic job when they finish their PhD's. Most do, but some don't.

 

Furthermore, do not, and I mean DO NOT, count on getting an Economics PhD for the purpose of crossing over into the Finance arena when you are finished. These people are actually called "Cross-Overs", and it is not very common anymore. This was a fairly common practice about ten years ago mainly due to the lack of Finance PhD's. However, today, there are more Finance PhD's that can fill Finance job openings. The only Economists who can actually cross over into Finance are the really good ones who have plenty of HIGH QUALITY publications in Financial related topics under their belt. This usually means that you are coming from a top 15 Economics program, and doing research in Finance. It is obvious that all Economists would be trying to cross-over if they were able simply because of the salary differences mentioned before. The main reason that this practice of "Crossing-Over" was stopped was because it was causing such problems with an Economists was being hired into a Finance Department making about 50% more than Economists working over in the Economics Department. The finance department was forced to either stop hiring Economists, or equalizing pay with the Economics Department. This would mean pay cuts for the new Finance PhD's, so they just quit hiring "Cross-Overs".

 

Like I said, all this is very common knowledge. Talk to any of your Finance or Economics Professors and they will tell you the same thing. In fact, the person I used for advice when applying to Finance PhD programs was a Finance Professor with an Economics PhD. He told me that he had to spend 8 years over seas in a "No-Name" university doing research on Finance related topics. He then came back to the US in 1996, and got his job in the Finance Department of the College of Business. Since then, the same University actually has a policy that says that they can't hire Economists to fill Finance Tenure Track jobs. The Economics Department of the same university verified this information. I guess when he got hired at about 50% more than the other Economists at the same University teaching in the Economics Department, it caused some major problems. Most of the other Economists were either trying to switch over to the Finance Department, or calling for equalized pay (hoping theirs would go up rather than the Finance PhD's would go down of course). So, now, this University has a policy that the Finance Department cannot hire non-finance PhD's to fill their jobs.

 

Sorry to go long here, but you should consider all the facts when making decisions like this. Talk to your professors.

[darcie]

I guess a qualified candidate should at least know the differences of these three majors. Maybe you are fit for stat phd

[unitroot]

What a bunch of drivel Hocking! And yet, you have not mentioned clearly the single most important reason why econ PhDs likely will not get a job in a finance department. The biggest reason is that most of normal econ PhD programs do not have anyone working in and teaching empirical asset pricing/capital markets or corporate finance, which are the specialties that are most sought after by finance departments. I don't see a reason why an econ PhD grad who did a solid, possibly published, paper in finance related subject could not get a job in a finance department. The issue is that most economics departments do not focus much on that kind of research to begin with.

 

Conclusion: If you want to get the broadest possible training in finance, including in empirical asset pricing, forget about 99% of economics PhD programs and apply mostly to finance departments. If you want to do very mathematical stuff and focus on mathematical finance then go to math/stats department. If you're interested primarily in financial _econometrics_ (as opposed to empirical asset pricing), then number of places to study this is limited and many of them are actually straight econ phd programs.

[Hocking]

I guess I thought that was obvious unitroot. Economics PhD Programs focus on Macro, Micro, Econometrics, Econ History, ect.... Finance PhD Programs focus on Asset Pricing models, Capital Markets, and Corporate Finance. That is obvious. If they did the same things, then Financial Economics (or Finance) would simply be an area of specilization underneath the Economics Umbrella.

 

Again, if this topic matters to you, you should talk with Economics and Finance PhD Professors at your Universities. They will tell you the same things that I have pointed out as far as pay, and Economics PhD's crossing over to Finance. The two fields are notorious for locking the other field out in most cases. If they didn't, you would not see salary differences between the two.

[unitroot]

They will tell you the same things that I have pointed out as far as pay, and Economics PhD's crossing over to Finance. The two fields are notorious for locking the other field out in most cases. If they didn't, you would not see salary differences between the two.

I am not really sure whether the stuff that you're saying makes any sense whatsoever. Are you saying that the only reason say labor economists make less on average than finance professors is because the finance departments have explicit orders not to hire them? Again, your argument seems to fall apart, I don't even understand if things you said have a coherent argument there..

 

Everyone makes what the supply and demand dictates. Neither economists are a homogeneous group of people who apparently all could be well teaching in finance departments and making a finance professor's salary if it was not for some odd regulation that your university is apparently practicing. If they did research that interests finance department, they'd be hired. This should have not affect salaries of other economists teaching at the same university in other departments. Perhaps your school has these regulations because of some whacked faculty union that mandates that everyone who has a degree in the same field has to make the same salary at your university or something like that? Otherwise I don't understand why should be any relationship between the salaries of economics faculty and the fraction of finance department faculty who are economists.

 

I as I mentioned, the most important criteria for choosing between finance and economics departments is indeed the (obvious) stuff I posted above instead of some whacked and irrelevant things you mentioned about some regulations..

[mamoqilo]

One more point: If you seek a placement in the finance dept, there is a relatively higher downward movement for a fresh econ phd than a fresh finance phd. For example we have asst profs from NYU econ and boston college finance. (Of course the top econ/finance depts are outliers.)

[igotshoe]

unit, he is correct if you talk to finance faculty. finance phds are undersupplied and in high demand (bschools/undergrad). while econ phds are fully capable and sometimes could do the job better than finance phds, that scarcity equates to a higher salary.

 

case in point, my school (relatively low ranked) hired a veteran (20+ years) nyu econ phd for an endowed chair and he makes ~150k, also at the same time we hired a freshly graduated georgia state finance phd for ~120k.

 

i have witnessed the disparity in my own eyes as well as discussed this with professors, because i love both finance and econ. presuming an individual has no preference, finance is the route to go for prestige, money, etc.

[unitroot]

while econ phds are fully capable and sometimes could do the job better than finance phds, that scarcity equates to a higher salary.

My claim is that this is not true. The vast majority of economists do not work in areas most important to finance departments. Even those who list "asset pricing" or "financial economics" on their resume often work either in theory or macro-related asset pricing issues, material of little empirical content and of no relevance to say MBA course. The wage differential is generated by the supply and demand for what you DO and not what the degree is. Another determinant is the professor's previous job. If the said NYU PhD was already making $200K/year, there would no easy way for any department to bring him for less than that. I agree with the assertion that if ones goal is to teach in finance department, then getting PhD in finance is obviously the best way to get there. However, it is true because most Econ PhD programs do not teach finance, not because of some rules that supposedly prevent (the supposedly equally qualified) economists from teaching in finance department.

[unitroot]

You are too biased I should say

the data you gave are somewhat exaggerated

And for econ phd,you can always try to find jobs in bschools

 

Here are the placements of harvard econ phds

Harvard Econ Department - Placement Information

Many graduates went to school of business

 

Yes, this happens a lot. I would bet that most of those business school placements that economists get are actually in business school _economics_ departments or related subjects..

[igotshoe]

Yes, this happens a lot. I would bet that most of those business school placements that economists get are actually in business school _economics_ departments or related subjects..

 

say this is common, lets take a look at MIT (arguably the best econ program).

MIT Department of Economics : Graduate Program : Career Placement

average salary for b-school is $136k

 

now take a look at Georgia Tech (Top 50 business)

http://mgt.gatech.edu/fac_research/acad_areas/files/Oct_2007_finance_phd_flyer.pdf

their range is $140k-$180k

 

another range coming from Wisconsin (their econ>their b-school)

Finance PhD - UW-Madison School of Business

they quote $140k+

 

how do you explain this disparity?

[unitroot]

say this is common, lets take a look at MIT (arguably the best econ program).

MIT Department of Economics : Graduate Program : Career Placement

average salary for b-school is $136k

Once again, you're not reading my argument. This quote above does not contradict what I was saying. How many of those are doing research in finance or competing directly against other business PhDs? There are some business schools with business economics departments or say strategy departments that may employ economists specializing in a wide range of subjects, from game theory to public policy. Obviously, the market price for this services may be different from people working in and teaching finance.

 

now take a look at Georgia Tech (Top 50 business)

http://mgt.gatech.edu/fac_research/acad_areas/files/Oct_2007_finance_phd_flyer.pdf

their range is $140k-$180k

You're comparing apples and oranges. This is the figure for all jobs, academic and not.

 

Look, I am not arguing that average starting salary of finance PhDs is higher compared to econ PhDs. But this is mostly dictated by the supply and demand for the research and other work in the respective subjects, and not some rubbish argument about some nonsense regulations that supposedly prevent economists from teaching finance at some university. This is all I am saying. Based on that flawed argument, the ONLY reason a labor economist or an econometrician WHO never even took a finance course is being prevented from making a finance PhD salary is that ALL business schools have a policy not to hire economists into finance departments. Yeah right. I just don't buy this.

[igotshoe]

unit, i understand the merits of your argument and i hope you can understand mine as well. further argument is asinine, but i did thoroughly enjoy our spirited discussion.

[quinn]

yes! spirited discussion indeed! Thanks everyone so much for all the help and advice. I've read through everyone's comment and I have indeed talked with professors from all three departments. Right now, while I think I would like a finance program the best, I don't think I will be able to get in to any good ones, since I'm not the strongest applicant. So I'm probably going to be shooting more towards statistics programs, just because I think I can get into some pretty decent ones. But I will apply to some of each

 

Anyone got any ideas of what schools I should be shooting for? Here's my profile:

 

I'm at UVA, majors: Math and Econ

 

Undergrad math Courses: Calc 2, 3: A's in both, Lin Alg: A, Diff EQ: B, Real Analysis: A-, Probability: B, Math Stat: B+

"Masters" math/stat courses: Real Analysis: A-, Stochastic Processes: A, Time Series: A

Econ Courses: Econometrics: A-, Micro: A, Macro: A, Money/Banking: B+, Math econ: A-, experimental econ: A-

 

I will take undergrad abstract algebra and game theory, and "masters" level partial DEQ, multivariate stat, math/theoretical stat

 

I have no research or teaching experience. My LORs will be "okay", one well-known professor, but none of them will be "shinning".

 

I'm taking the GRE in two days. I don't think I can get a Q800, but I'm confident I can get around a Q780 or so.

 

Like I said, my profile is pretty weak. But I have NO clue what schools I should be shooting for. Does anyone have any suggestions for reach, target, and safety schools in any of either econ, finance, and stat programs?

 

Thanks again in advance for any help!

[Weary]

Here are the placements of harvard econ phds

Not sure if there are HBS people, but KSG is definately included, so not really econ phds.

[Hocking]

Uni,

 

You are correct when you say supply and demand dictate salary. That is half of the point I am making. Do you realize that most Economics PhD Programs have about 20-30 students start their program in any giving year. Are you also aware that nearly 50% to 75% of these students finish their Economics PhD program in any giving year. So each school supplies anywhere from 8 to 15 new Economics PhD's per year. I visited Indiana University last year, and they had 12 people coming on the job market in 2008. These are definitely brilliant people, but I know that many of them had difficulty finding good placements because there were so many of them hitting the job market. How many of us have had Economics courses at "low ranked" or "no ranked" universities with Economics Professors having degrees from top 10 Economics Programs. This is why.

 

Compare that to Finance PhD Programs. Most of these programs start 2 or 3 people in any giving year. Assuming 75% of them complete their programs, we can say 1 or 2 graduate from each Finance PhD Program in any giving year. This is one of the reasons why Finance PhD salaries are so much higher than Economics. The other reason is that there is many more students interested in getting their degrees in Finance/Business rather than Economics, so there is naturally more demand being placed on Finance PhD's to begin with.

 

You question the fact to if there is a systematic "locking out" of Economics PhD's from Finance programs. Have you talked to any Econ and Finance professors where you go to school at about this topic? Like I said, Economics PhD's would love to make $140,000 per year compared to their average starting salary in the $70,000-80,000 range. Finance is also aware that if they opened the door to Economics PhD's they would see there higher salaries plummet due to the increase in supply of Economics PhD's coming into our realm. Yes, there is a systematic locking out of Economics PhD's from Finance Departments. It is often joked that the Finance people understand supply and demand better than the Economists. Again, if you don't believe me, ask your professors where you go to school at. This is all very common knowledge. Now, if you get your PhD in Economics at a top 5 program, then you may be able to get a job in a Finance department.

 

Case in point, in my doctoral program a few weeks ago we had a Professor from another school come in and talk to us about there research. The first question to be thrown at him was about the fact that he had a PhD in Economics. He said that he did, and then he said that he likes to keep that as quite as possible. He was half joking of course, but the idea is very true. There are fewer and fewer Economists getting jobs in Finance departments. He knows that when one does, it creates nothing but controversy. Other Economists working at his university wonder why he makes 50% more than they do, and other Finance PhD's get concerned that a bunch of Economists are going to run into their turf and drive there salaries down to Economists levels.

 

Quinn, you don't have to go to a top Finance PhD program to get a good job. Again, the small supply of Finance PhD's in the system helps you in this case. It is often said that you need to go to a top 20 or 30 Economics PhD program to land a "good" academic job, this is not the case in Finance. If you could get into a top 50 or even top 75 program, you could still get a great job at a state University or college. People coming out of these programs will still get salaries in the $120,000 to $135,000 range at decent schools. If you are interested in Finance, apply to some of these lower ranked Finance programs and you may be surprised.

[quinn]

Hi Hocking, thanks for the info. but given my profile (see above), what programs should i be shooting for?? I really have NO clue which i could get into. A few names for reach/target/safety would be really helpful.

 

thanks again!