Admissions comparison -- PhD Finance vs. PhD Economics

[rcwlhk]

Hi all,

I would really appreciate any input on this topic!

What do you think are the key differences and similarities between admissions in a top tier PhD Finance program vs. a top tier PhD Economics program?
Perhaps I can start by making the following observations:

(1) Clearly, there are close similarities between the core courses between a PhD Finance student and a PhD Economics student. I believe both need to go through the entire micro, macro and metrics sequence.

(2) PhD Finance programs appear to be more competitive. But I would like to add a slight caveat --- while on absolute numbers basis, it does seem so (i.e. 3 - 5 admits per school). But please do correct me if I'm wrong, but it seems the number of applicants to PhD Finance programs are also smaller than that of Economics.

An example (I know there are more schools out there but I just picked one as an illustration. Feel free to give further examples or counter-examples!)
Northwestern Kellogg PhD Finance: 8 Admitted; 196 Applied; 4.08% Yield
Northwestern PhD Economics: 18 - 25 Admitted; 600 Applied; 3.00% - 4.17% Yield

So, it seems that at least for Northwestern, I don't see a significant difference between the yield (admitted / applied ratio) of PhD Finance and PhD Economics programs.

So, in such cases, do absolute numbers matter more than the ratios?

(3) Just going through the profiles of PhD Finance and PhD Economics students, I've noticed the following trends (please correct me if I'm wrong):
-There's a higher proportion of Economics students with Masters degrees and/or previous academic experiences (i.e. research assistant, publication, etc) than their Finance counter parts

-There are many more Math majors going into Economics programs than Finance

-Very few individuals going into Finance programs had a Finance / Business undergraduate training; but a good number of them have MBA's

-Most of those who are admitted to Finance programs had some form of industry work experience (typically in investment banks, consulting firms, hedge funds, etc)

-The strongest observation that I've made is that, it seems there are a plethora of examples of individuals at top tier Finance programs with significant work experience (i.e. 5 years or more) and did not have a math / hard science undergrad / master background. This leads me to wonder --- how many of these admitted individuals have real analysis (which appears to be VERY IMPORTANT in the TM Econ forum), graduate level econ / math / finance courses, and top Finance / Econ professors writing LOR's for them?

That's the end of my observations.

Please do share your opinions and thoughts!

[Prawler]

Hi,
I am starting my doctoral studies in Finance this fall. I'll attempt to share all my observations and thoughts based upon your questions.

(1) Clearly, there are close similarities between the core courses between a PhD Finance student and a PhD Economics student. I believe both need to go through the entire micro, macro and metrics sequence.

I don't know about top tier programs but for the following tier, you take micro,macro and metrics sequence relying on your concentrations. Some guys might not necessarily take micro and macro courses. For example, if you have already taken these courses in intermediate level in undergraduate or masters level, you might not take them. Even more to exemplify, most students with Economics courses does not take these courses.

(2) PhD Finance programs appear to be more competitive. But I would like to add a slight caveat --- while on absolute numbers basis, it does seem so (i.e. 3 - 5 admits per school). But please do correct me if I'm wrong, but it seems the number of applicants to PhD Finance programs are also smaller than that of Economics.

An example (I know there are more schools out there but I just picked one as an illustration. Feel free to give further examples or counter-examples!)
Northwestern Kellogg PhD Finance: 8 Admitted; 196 Applied; 4.08% Yield
Northwestern PhD Economics: 18 - 25 Admitted; 600 Applied; 3.00% - 4.17% Yield

So, it seems that at least for Northwestern, I don't see a significant difference between the yield (admitted / applied ratio) of PhD Finance and PhD Economics programs.

So, in such cases, do absolute numbers matter more than the ratios?

I partly agree and partly disagree with your opinion. The portion that I agree with you is, - no doubt on that- , business schools admit only small numbers per specialization whereas economics departments have more crowded incoming classes. The part that I don't agree with you is that I think PhD Finance programs have more number of applicants and since these programs give full and generous funding and provide better opportunities and options after graduation, these programs are much more competitive. On another perspective, people apply to economics because they think that they are more likely to receive admission letter from econ. departments. Don't be so bothered with numbers. Decide which one you are more interested in.

(3) Just going through the profiles of PhD Finance and PhD Economics students, I've noticed the following trends (please correct me if I'm wrong):
-There's a higher proportion of Economics students with Masters degrees and/or previous academic experiences (i.e. research assistant, publication, etc) than their Finance counter parts

-There are many more Math majors going into Economics programs than Finance

-Very few individuals going into Finance programs had a Finance / Business undergraduate training; but a good number of them have MBA's

-Most of those who are admitted to Finance programs had some form of industry work experience (typically in investment banks, consulting firms, hedge funds, etc)

-The strongest observation that I've made is that, it seems there are a plethora of examples of individuals at top tier Finance programs with significant work experience (i.e. 5 years or more) and did not have a math / hard science undergrad / master background. This leads me to wonder --- how many of these admitted individuals have real analysis (which appears to be VERY IMPORTANT in the TM Econ forum), graduate level econ / math / finance courses, and top Finance / Econ professors writing LOR's for them?

That's the end of my observations.

I have been directly admitted to PhD. Finance from undergraduate. I might be an exceptional example but I already with some guys in the same situation. However, most of the guys, who were planning to go for PhD Finance, had some graduate degrees and extensive work experience somehow. Most of them were above their mid twenties.

Hope this helps!

Best,

[rcwlhk]

@Prawler

Thanks for the detailed insight --- especially from a PhD Finance student-to-be!

(1) I wasn't aware that in PhD Finance, there's some flexibility in regards to the economics courses that one is required to take. But that's interesting info!

(2) I don't want to be argumentative or defensive (as I really do appreciate all of your inputs), but I still cannot find the concrete quant data to support that PhD Finance is MUCH MORE competitive than their PhD Economics counterparts.

I'm just adding more data points here (and again, by no means exhaustive):

Figures shown below as: Admits (or enrolled, whatever is available) / Applicants (% Ratio)

Iowa
Finance: 4 / 75 (5.3%)
Economics: 23 / 178 (12.9%)
http://www.biz.uiowa.edu/phd/Fall07AdmResults.html

NYU
Finance: 4 - 6 / 300 (1.3% - 2.0%)
Economics: 30 - 40 / 1000 (3.0% - 4.0%)
PhD
NYU > Economics > Graduate Program > Ph.D. Programs > Bulletin

That's all I can find in my 15 min search. But so far, I'd venture to say that it is inconclusive. (But Iowa was definitely very interesting). As well, and I think this has been noted before, very few schools give detailed breakdowns of their business school admits and so, the Finance admit-to-application figures are incredibly difficult to find.

(3) I don't think you touched on this before but would you please comment further? That is, the typical math aptitude of PhD Finance admits. I still can't think of a very good reason to explain why or how some of these people with many years of work experience + a non-math / hard science background can get pass the "math requirements" of the PhD Finance program. Does this hint to the notion that the process is indeed more "random" than PhD Economics? Or perhaps I'm just thinking in a totally different direction.

I also do recognize that the math requirements in corporate finance and asset pricing are vastly different; namely, less math (relatively speaking) in corporate finance and more math in asset pricing (especially theoretical material).

Thanks!

[Prawler]

Originally Posted by rcwlhk

@Iowa
Finance: 4 / 75 (5.3%)
Economics: 23 / 178 (12.9%)
http://www.biz.uiowa.edu/phd/Fall07AdmResults.html

NYU
Finance: 4 - 6 / 300 (1.3% - 2.0%)
Economics: 30 - 40 / 1000 (3.0% - 4.0%)
PhD
NYU > Economics > Graduate Program > Ph.D. Programs > Bulletin

Arizona University, Tucson also says that they receive about 40-50 applications annually, and only admit 2 to 4 of them (Finance PhD). The pattern is similar in most schools: Fewer applications in Finance but the chance of enrollment is more slim in Finance then it is in Economics. I explained the reasons elaborately in my post forehead.

(3) I don't think you touched on this before but would you please comment further? That is, the typical math aptitude of PhD Finance admits. I still can't think of a very good reason to explain why or how some of these people with many years of work experience + a non-math / hard science background can get pass the "math requirements" of the PhD Finance program. Does this hint to the notion that the process is indeed more "random" than PhD Economics? Or perhaps I'm just thinking in a totally different direction.

I also do recognize that the math requirements in corporate finance and asset pricing are vastly different; namely, less math (relatively speaking) in corporate finance and more math in asset pricing (especially theoretical material).

I think schools prefer guys with quantitative analysis. Let's think of an investment banker, or someone who has extensive quantitative skills. And assume that this guy has a masters in Mathematical Finance. This guys knows how the financial sector works, and he is experienced. Excellent choice!! But I don't know about the guys with hard science are enrolled in Finance PhD program. They might have convincing letters of recommendation and a fantastic SOP to convince the faculty about that. Do you imagine a finance faculty, which is interested in enrolling and FUNDING students with no math background. Finance requires some math background, at least at calculus level. I still doubt about guys just enrolled with basic calculus. It is very hard to sustain in Finance PhD without strong quantitative skills. I see the issue as nearly impossible, in my personal judgment.

For my case, I don't have much work experience, just some intern in accounting field, but I am still an undergraduate that has taken Calculus, Mathematical Economics, Statistics, Mathematical Statistics, Econometrics, Applied Econometrics. We can say that I am familiar with Math The fact is that you forget math when you do not use it for years.

[Bloomsbury]

Just to add my 2 cents, I'm under the impression that the acceptance rate to phd in finance doesn't decrease much when you go down in the phd ranking... acceptance rate is not much higher in the 100ish than in the 20ish.

[Teazer]

Originally Posted by rcwlhk

Hi all,

I would really appreciate any input on this topic!

I'm just coming to the end of my first year in a phd finance program, so here's what I've learned so far....

What do you think are the key differences and similarities between admissions in a top tier PhD Finance program vs. a top tier PhD Economics program?

The % admittance to finance vs top econ schools is similar but there's a huge difference in level. Finance programs are much much smaller. That means even if you're really well qualified for a finance program, it is still very likely to get rejected. If you go that route, apply to a lot of schools. I did about 12 & that almost wasn't enough! Once you're in though, they want you to succeed too.

Econ departments have less of a random factor in the admittance part - they figure once you're in they'll see if they like you and if not cut you out in the first couple of years. Once you're in, you also need to do better than other students to stay in.

(1) Clearly, there are close similarities between the core courses between a PhD Finance student and a PhD Economics student. I believe both need to go through the entire micro, macro and metrics sequence.

Depends on the program, but in mine the first year is basically the same as for first year econ students. They have to do macro in the 1st year, whereas it is an elective for us in the 2nd year & we have some finance seminar courses instead, but pretty much if I & an econ student planned our electives right, we could end up both doing exactly the same courses.

(2) PhD Finance programs appear to be more competitive.

The problem is the randomness of the process. To get into finance you need to be good + be very lucky, or apply to a much large number of schools to have a good shot at getting in somewhere.

(3)

Business schools are more likely to value some pertinent non-academic work experience on the whole, particularly if it gives you inside knowledge of some area of industry. As far as math ability, in econometrics classes, the finance students tended to usually be towards the top of the distribution in such exams. Econ seems fine with a good knowledge of calculus, maybe some ode's for macro, linear algebra & analysis. If the finance program specializes in asset pricing, they'll probably also be looking for more of the wacky math at admittance - other kinds of analysis, stochastic calc. pde's etc as well.

This leads me to wonder --- how many of these admitted individuals have real analysis (which appears to be VERY IMPORTANT in the TM Econ forum), graduate level econ / math / finance courses, and top Finance / Econ professors writing LOR's for them?

Yes, yes & no in that order at least for me! For other data, I had 3 years of academic research + several years banking industry experience.

[Bloomsbury]

Thanks for sharing your experience Teazer. In which school are you ?

[rcwlhk]

That's some very good insight! Thanks a lot!

Originally Posted by Teazer

I'm just coming to the end of my first year in a phd finance program, so here's what I've learned so far....



The % admittance to finance vs top econ schools is similar but there's a huge difference in level. Finance programs are much much smaller. That means even if you're really well qualified for a finance program, it is still very likely to get rejected. If you go that route, apply to a lot of schools. I did about 12 & that almost wasn't enough! Once you're in though, they want you to succeed too.

Econ departments have less of a random factor in the admittance part - they figure once you're in they'll see if they like you and if not cut you out in the first couple of years. Once you're in, you also need to do better than other students to stay in.



Depends on the program, but in mine the first year is basically the same as for first year econ students. They have to do macro in the 1st year, whereas it is an elective for us in the 2nd year & we have some finance seminar courses instead, but pretty much if I & an econ student planned our electives right, we could end up both doing exactly the same courses.


The problem is the randomness of the process. To get into finance you need to be good + be very lucky, or apply to a much large number of schools to have a good shot at getting in somewhere.


Business schools are more likely to value some pertinent non-academic work experience on the whole, particularly if it gives you inside knowledge of some area of industry. As far as math ability, in econometrics classes, the finance students tended to usually be towards the top of the distribution in such exams. Econ seems fine with a good knowledge of calculus, maybe some ode's for macro, linear algebra & analysis. If the finance program specializes in asset pricing, they'll probably also be looking for more of the wacky math at admittance - other kinds of analysis, stochastic calc. pde's etc as well.



Yes, yes & no in that order at least for me! For other data, I had 3 years of academic research + several years banking industry experience.

[rcwlhk]

Just another question popped into my mind and I hope you could share some insight on this!

With regards to the mathematic skills one needs to get admitted into PhD Finance vs. PhD Economics, what do you think are the key differences? I know you touched on this briefly on your previous post but I'm hoping you could expand on it.

And yes, I do realize that most programs' official prerequisites are just multivariable calculus, linear algebra, statistics and maybe real analysis. But "realistically speaking" (i.e. to have a realistic chance of getting in), what additional math skills do we need here? Specifically what are the differences and similarities for PhD Finance vs. PhD Economics? (i.e. Does Finance prefer candidates to have stochastic calculus whereas it may be not so important in Economics? Conversely, perhaps Economics prefer people to have greater skills in ODE than in Finance?)

Originally Posted by Teazer

I'm just coming to the end of my first year in a phd finance program, so here's what I've learned so far....



The % admittance to finance vs top econ schools is similar but there's a huge difference in level. Finance programs are much much smaller. That means even if you're really well qualified for a finance program, it is still very likely to get rejected. If you go that route, apply to a lot of schools. I did about 12 & that almost wasn't enough! Once you're in though, they want you to succeed too.

Econ departments have less of a random factor in the admittance part - they figure once you're in they'll see if they like you and if not cut you out in the first couple of years. Once you're in, you also need to do better than other students to stay in.



Depends on the program, but in mine the first year is basically the same as for first year econ students. They have to do macro in the 1st year, whereas it is an elective for us in the 2nd year & we have some finance seminar courses instead, but pretty much if I & an econ student planned our electives right, we could end up both doing exactly the same courses.


The problem is the randomness of the process. To get into finance you need to be good + be very lucky, or apply to a much large number of schools to have a good shot at getting in somewhere.


Business schools are more likely to value some pertinent non-academic work experience on the whole, particularly if it gives you inside knowledge of some area of industry. As far as math ability, in econometrics classes, the finance students tended to usually be towards the top of the distribution in such exams. Econ seems fine with a good knowledge of calculus, maybe some ode's for macro, linear algebra & analysis. If the finance program specializes in asset pricing, they'll probably also be looking for more of the wacky math at admittance - other kinds of analysis, stochastic calc. pde's etc as well.



Yes, yes & no in that order at least for me! For other data, I had 3 years of academic research + several years banking industry experience.

[Teazer]

Not knowing the mind of the admissions commitee, I can only venture a guess, but anything that sets you apart from the large stack of applications with very high quantitative scores is a good thing! It would depend somewhat on the program. If you're looking at departments that do theoretical asset pricing then a background in such things would tie in nicely. In general you're much more likely to end up actually using it in a finance program than in economics. For less theoretical or more corporate places, it's not nearly as likely to be a critical decision maker, but again, having something that makes you stand out would be the thing.

On the whole, differences between econ & finance department requirements are probably outweighed by differences due to departmental focus on such things as theory vs empirical focus, as well as idiosyncratic variations due to who comprises the admit commitee that year.

Probably if I had to do the application over again & had the time, I'd do a few extra statistical theory classes, pde's or linear analysis, more because they are useful than anything else. I'd also spend more time getting good LOR's and vet my SOP through more people that know what a phd program is like.