Any Exposure to Finance in PhD Core Courses?

[YoungEconomist]

I've never taken any finance classes as an undergrad, because I was too busy taking other classes and I often thought I wouldn't be that interested in finance, financial economics, etc (in all honesty, I don't even know the difference between these titles/disciplines). Anyways, sometimes I think I may actually like finance, and am wondering if this will become clear to me during the first year? Do people who specialize in finance (or financial economics) usually know this is what interests them before a PhD program, or do they often find out during a PhD program? Are PhD students exposed to some finance during the first year (if so, it must be in macro right)?

P.S. Is there a difference between finance and financial economics, and if so what?

[YoungEconomist]

I'd also be interested to know which type of (non-academic) jobs are available to those specializing in financial economics?

[economicus]

We have financial economics as a last block of a macro sequence. The course is based on two books: Principles of Financial Economics (LeRoy, Werner) and Asset Pricing (Cochrane). Though, I would say it depends on a particular department...

[Golden Rule]

So first year micro sequence is going to cover choice under uncertainty, general equilbrium under uncertainty. That'll include insurance, asset markets, etc. (see C6 and C19 of MWG). The fourth quarter we did some corporate finance type questions in the context of contract theory, i.e. moral hazard, signaling, screening, etc. So finance comes up every now and then in micro. A finance-type question came up at least every quarter in macro. We never did a whole section on finance, per se.

My ultimate advice though is you're probably not going to be able to decide your fields solely based on what you're exposed to in the first-year core -- you might see an application to some specific subfield here and there, but nothing comprehensive, and unlikely anything on the frontier of the field. Best thing to do I think is look at papers on 2nd-year syllabi anywhere and see if the kinds of questions being asked interest you.

As for finance jobs, see if you like finance phd placements... and maybe the business phd forum has more info?

[macroeconomicus]

Little or no exposure. You'd have to take a financial economics field course or a seminar for that.

Finance is a huge field that can roughly be divided into asset pricing and corporate finance. Each one of these has can be broken down further into subfields. For example asset pricing can be roughly divided into theoretical and empirical. Financial econometrics, related field, can be considered a subfield of empirical asset pricing. The mathematics of pricing derivative securities can be also considered as a subfield of asset pricing, although mathematical finance is such huge subject now that it can be pursued as a field on its own right within some mathematics departments. Besides theoretical and empirical, research in asset pricing can also have behavioral and experimental dimensions. Market microstructure is another big subfield in asset pricing and it deals with the micro-analysis of how exchange takes place in financial markets. Faculty rosters in finance departments often include people who work in international finance.

Corporate finance also a very big subject on its own right. It deals with financial decision making within a firm and it has closer links to the theory of firm, I/O, and, like in asset pricing, the research in corporate finance can be theoretical or empirical, with behavioral and experimental methods becoming popular.

The biggest difference between finance and economics phd programs is that if you're in a finance phd program, you essentially have to complete courses in two fields: corporate finance and asset pricing (in addition to first year economics and econometrics courses, and other electives) and you have to write a thesis in finance or a related subject. Economics PhD students are usually free to complete three fields where one can be chosen from finance department. If you have an intention to pursue two fields from finance departments, then it makes sense to apply directly to Finance PhD program.

If you're economics PhD student, you can write a thesis on asset pricing or corporate finance as long as you can find an adviser. Some economics departments have asset pricing people or econometricians, others don't. In the later case, finding an adviser might be tricky because finance faculty might or might not want to work with economics phd students (personally, I think it totally depends on your interests and whether you have any good ideas for research rather some bureaucratic technicalities. If they see benefits of working with you, they'll work with you.) Some economics departments teach their own asset pricing courses even though the department of finance also has them (e.g. UCLA, Berkeley, UCSD, USC, Minnesota). One notable difference between the asset pricing faculty in the economics departments vs people in the finance departments is that people who work in economics departments tend to focus on theoretical asset pricing, international finance, or macro asset pricing while people who work in finance departments usually tend to work on the empirical side, but that's not always true.

From the employment perspective, I think the academic market for corporate finance types is bigger (think of all MBA programs that need corporate finance faculty) while empirical asset pricing people tend to face very good prospects in the private sector. Financial econometrics and mathematical finance are probably the most lucrative fields to work in industry although I am sure people who work in say international finance or market microstructure could still find very good employment.

[YoungEconomist]

Originally Posted by macroeconomicus

Corporate finance also a very big subject on its own right. It deals with financial decision making within a firm and it has closer links to the theory of firm, I/O, and, like in asset pricing, the research in corporate finance can be theoretical or empirical, with behavioral and experimental methods becoming popular.

Sounds like I might like corporate finance, as I'm already interested in IO. Does anybody know if there are many good (private sector) jobs with this background (if I choose to go that route)?

Originally Posted by macroeconomicus

The biggest difference between finance and economics phd programs is that if you're in a finance phd program, you essentially have to complete courses in two fields: corporate finance and asset pricing (in addition to first year economics and econometrics courses, and other electives) and you have to write a thesis in finance or a related subject. Economics PhD students are usually free to complete three fields where one can be chosen from finance department. If you have an intention to pursue two fields from finance departments, then it makes sense to apply directly to Finance PhD program.

Thanks for this info, I definitely think I'd be more interested in Economics with some potential applications to finance, as opposed to pure Finance PhD.