Preparing for a Finance PhD Program: What It Takes

[Mépris]

I would like to study Maths or Physics for my undergrad and eventually, go to grad school. I can't possibly know if I'd want to go to grad school in science and I'm just curious with regards to what it takes to get into a Finance PhD program. For maths/physics, it is my understanding that very good grades (GPA: >3.5, generally), great recommendation letters, research experience and good scores on the GRE are what's enough. But what about finance? Is it generally the same preparation? From what I gather, the competition is very stiff among the few who want to go to grad school in Finance *but* because of that, there are quite a few jobs that a Finance PhD could be doing. (I read Don Chance's article on the subject but that's about it)

Cheers

 

[chez_butt23]

I really don't know anything about this, but you might need an MBA first. Like I said, I don't really know.

 

[Pyrrhus]

If you come from a strong math background, you are likely to be accepted (assuming you have good grades, and have strong recommendations). My bet is Finance PhDs value highly strong mathematical skills similar to Economics PhDs.

 

[twofish-quant]

I would like to study Maths or Physics for my undergrad and eventually, go to grad school. I can't possibly know if I'd want to go to grad school in science and I'm just curious with regards to what it takes to get into a Finance PhD program.

1) The admission rates in finance grad schools are lower than science grad schools, and you generally will not get TA/RA-ships.

2) Finance Ph.D.'s work a lot more with the tier system than physics Ph.D.'s.

3) Finance Ph.D.'s are pretty much guaranteed a tenure track position once they get out, but the catch is that they very, very heavily restrict admissions.

4) One other reason that finance Ph.D.'s are few is that most people that are interested in finance, just get a masters and then get work experience. Something that is true in finance that is not true in physics is that practitioners tend to look down on academics with no work experience. In the physics pecking order, tenured faculty are at the top of the food chain, but in finance, they tend to be at the bottom if they have no work experience.

If you want to do finance rather than physics that is one thing, but I don't think it will work to get a finance Ph.D. because you think that you won't get into a science/engineering graduate school, since the competition to get in is quite a bit harder.

 

[Mépris]

If you come from a strong math background, you are likely to be accepted (assuming you have good grades, and have strong recommendations). My bet is Finance PhDs value highly strong mathematical skills similar to Economics PhDs.

You're at Minnesota, right? Are you provided with any kind of funding? TA/RA?

1) The admission rates in finance grad schools are lower than science grad schools, and you generally will not get TA/RA-ships.

2) Finance Ph.D.'s work a lot more with the tier system than physics Ph.D.'s.

3) Finance Ph.D.'s are pretty much guaranteed a tenure track position once they get out, but the catch is that they very, very heavily restrict admissions.

4) One other reason that finance Ph.D.'s are few is that most people that are interested in finance, just get a masters and then get work experience. Something that is true in finance that is not true in physics is that practitioners tend to look down on academics with no work experience. In the physics pecking order, tenured faculty are at the top of the food chain, but in finance, they tend to be at the bottom if they have no work experience.

If you want to do finance rather than physics that is one thing, but I don't think it will work to get a finance Ph.D. because you think that you won't get into a science/engineering graduate school, since the competition to get in is quite a bit harder.

Nooo, I said it's something I am interested in and might give it a shot, *if ever*, I no longer like the idea of doing a PhD in Physics or any other science by my junior year.

What about Finance PhDs who work in industry? Generally, did they go to grad school straight away or start working with an MS/MA first? Why they would look down on other fresh PhDs if they too were once, a fresh PhD?

Another thing: I was given to understand that Finance and Economics PhDs, aren't supposed to know much math. And those who work in investment banking are generally just plugging in numbers into equations? Or was that just a gross generalisation and what they do, in terms of math, is very limited to what quants/developers do? I see that math like multi-variable calc, differential equations, linear algebra and statistical inference is required. And even more math is on the coursework.

 

[Mépris]

What kind of applicants have a realistic shot at getting into a top-tier Finance PhD program? Or is that just a crapshot, as with getting into the "big name colleges"? My guess, besides very good grades in hard mathematics courses, is getting published? How do you convince the ad-com you should be doing a Finance PhD when you've studied Physics or Maths? Assume you haven't had the chance to take any *formal* classes but have some working knowledge.

 

[Pyrrhus]

You're at Minnesota, right? Are you provided with any kind of funding? TA/RA?

Yes. I am completing a PhD in Economics. I have funding. There are a lot of projects we get from several state organizations and some national. Economic Research is in demand.

 

[twofish-quant]

What about Finance PhDs who work in industry? Generally, did they go to grad school straight away or start working with an MS/MA first?

You see both, but most people went straight through.

Why they would look down on other fresh PhDs if they too were once, a fresh PhD?

Finance is different from physics in that vast, vast majority of people that work in finance do not have a Ph.D. Also a lot of practical finance is stuff that you can't learn easily in a university.

The difference is that if you have a physics or math professor make a statement about string theory, and someone that has never worked in a university says "you know nothing about the topic" people are going to believe the professor. By contrast, if you have a professor who has never been on the trading floor say something about the bond market, and bond trader with a bachelors says "you know nothing about bond trading" then people are more likely to believe the bond trader.

Another thing: I was given to understand that Finance and Economics PhDs, aren't supposed to know much math.

Depends on the field. If you are studying corporate M&A policy you don't need much math. If you do macroeconomics, you will at least have to know partial differential equations as well as most physics people, and if you do econometrics you will have to know things about statistics and time series analysis that most physics majors don't cover.

For macro, you do need to have a good background knowledge of math because people in economics and finance do use math as form of intimidation. If someone presents a bogus economic argument but uses lots of PDE's in their paper, you have to understand PDE's to know that this is a bogus economic argument.

And those who work in investment banking are generally just plugging in numbers into equations?

There are a lot of different roles, but there are in fact a huge number of jobs that involve plugging in numbers into equations. You don't need a Ph.D. for that. Also, the part that is important is usually less the equation itself, than understanding the context of the equation.

I see that math like multi-variable calc, differential equations, linear algebra and statistical inference is required. And even more math is on the coursework.

Yup.

 

[twofish-quant]

What kind of applicants have a realistic shot at getting into a top-tier Finance PhD program? Or is that just a crapshot, as with getting into the "big name colleges"?

It's much more of a crap shoot because it's harder to get into.

My guess, besides very good grades in hard mathematics courses, is getting published? How do you convince the ad-com you should be doing a Finance PhD when you've studied Physics or Maths? Assume you haven't had the chance to take any *formal* classes but have some working knowledge.

Internships in an investment bank would help. Also statistics would be important. The other thing is a good statement of purpose. I'm applying for a finance Ph.D. because I don't think I can get into a physics program, doesn't look good.

 

[Pyrrhus]

One point that twofish is trying to get across, which I think is valid. It's the respect for the degree. You see in Economics it works different to Finance (based on what twofish says, I really don't know much about finance PhDs). A PhD in Economics is respected more than a bachelor in Economics. The main reason is that Bachelor in Economics know little. They are too much intuition and "little" mathematical skills.

In addition, some areas such as transportation economics are full of mathematical optimization (stochastic, geometric, variational inequality, multilevel, and so on). Thus, some of these economists will also publish in Operation Research, and Applied Math Journals.

If you want to see glimpse of the mathematical subjects in Economics PhD, take a look at books such as Real Analysis with Economic Applications, Mathematical Optimization and Economic Theory, Optimal Control Theory with Economic Applications, Mathematical and Economic Theory of Road Pricing.

 

[Mépris]

Finance is different from physics in that vast, vast majority of people that work in finance do not have a Ph.D. Also a lot of practical finance is stuff that you can't learn easily in a university.

I was talking to this guy I know, who was a Finance major (he changed to corporate sustainability - not so sure what this is about, besides what the name suggests) and we were talking about what I intended to do. He gave me one weird look when I said grad school after bachelor's degree. He did share similar views to you with regards to work experience.

There are a lot of different roles, but there are in fact a huge number of jobs that involve plugging in numbers into equations. You don't need a Ph.D. for that. Also, the part that is important is usually less the equation itself, than understanding the context of the equation.

What kind of jobs are those? Bureaucratic kind of stuff? If it doesn't involve "people" stuff (presentations and "other stuff"), I take it that it's one hell of a boring desk job.

Internships in an investment bank would help. Also statistics would be important. The other thing is a good statement of purpose. I'm applying for a finance Ph.D. because I don't think I can get into a physics program, doesn't look good.

Looking at all possibilities for further study. "I don't think I would enjoy the idea of going to grad school in Physics but I feel that the mathematics that I've learned could be put to use in another field, say Economics/Finance, so I'm applying." sounds better, no? I'm interested in lots of things but I happen to find physics and maths more interesting, so I've decided to do one of the two. There's that and the flexibility that comes with a physics degree. If I feel like it, there's nothing stopping from applying to a computational neurobiology grad program. With a biology degree, on the other hand, I wouldn't have a realistic shot at getting into physics or maths.

One point that twofish is trying to get across, which I think is valid. It's the respect for the degree. You see in Economics it works different to Finance (based on what twofish says, I really don't know much about finance PhDs). A PhD in Economics is respected more than a bachelor in Economics. The main reason is that Bachelor in Economics know little. They are too much intuition and "little" mathematical skills.

That's another reason why I don't see the point in doing a BS/BA in economics or finance. While getting straight to the upper-level coursework would indeed be tough work, I find that spending three/four years doing maths/physics to be time better spent. But hey, that's just me.

In addition, some areas such as transportation economics are full of mathematical optimization (stochastic, geometric, variational inequality, multilevel, and so on). Thus, some of these economists will also publish in Operation Research, and Applied Math Journals.

If you want to see glimpse of the mathematical subjects in Economics PhD, take a look at books such as Real Analysis with Economic Applications, Mathematical Optimization and Economic Theory, Optimal Control Theory with Economic Applications, Mathematical and Economic Theory of Road Pricing.

I see. That sounds interesting.

What kind of mathematical background should one possesses to be able to read those? I was planning on learning some of the math that I'd learn in my first (and possibly) semester before going to uni anyway.
I can do first order differential equations, know some very basic stats and am learning intro complex numbers.

 

[twofish-quant]

What kind of jobs are those? Bureaucratic kind of stuff? If it doesn't involve "people" stuff (presentations and "other stuff"), I take it that it's one hell of a boring desk job.

There are a hundred different jobs that are in an investment bank. Also "boring" is a matter of opinion. A lot of "boring things" suddenly become exciting when there is large amounts of money involved.

A lot of the jobs involve shuffling papers, crunching numbers, and giving presentations. That might be "boring" but on the other hand shuffling papers, crunching numbers, and giving presentations is what a theoretical physicist does for a living.

Looking at all possibilities for further study. "I don't think I would enjoy the idea of going to grad school in Physics but I feel that the mathematics that I've learned could be put to use in another field, say Economics/Finance, so I'm applying." sounds better, no?

No it sounds terrible.

One problem is that the life of a economics/finance Ph.D. and that of a physics Ph.D. are more similar than different. A lot of being a Ph.D. in anything involves spending hours and hours in a library, going over large amounts of data, dealing with various bits of administrivia. If you state that you don't enjoy the idea of a physics/math Ph.D., people are going to wonder why you think a finance Ph.D. is going to be better.

Something about SOP's is that you should be positive. After all, I'm not going to be a lion tamer or a pastry chef, but if I apply for a job, I'm not going to list the thousands of jobs that I want to apply for. If you go for a Ph.D. in finance, you should mention why finance.

I'm interested in lots of things but I happen to find physics and maths more interesting, so I've decided to do one of the two. There's that and the flexibility that comes with a physics degree.

So if you are going to do a Ph.D., why not get one in physics or math.

What kind of mathematical background should one possesses to be able to read those? I was planning on learning some of the math that I'd learn in my first (and possibly) semester before going to uni anyway.

Lots of linear algebra. Also if you want to do graduate work in economics, you really should take a "real" statistics and probability course or the equivalent.

 

[Mépris]

There are a hundred different jobs that are in an investment bank. Also "boring" is a matter of opinion. A lot of "boring things" suddenly become exciting when there is large amounts of money involved.

Maybe.

A lot of the jobs involve shuffling papers, crunching numbers, and giving presentations. That might be "boring" but on the other hand shuffling papers, crunching numbers, and giving presentations is what a theoretical physicist does for a living.

Number crunching and presentations I have no problem with...
The boring part looks like the paper work. On that note, does your job have a strict dress code? Hair trimmed short, suit and tie kind of thing?

One problem is that the life of a economics/finance Ph.D. and that of a physics Ph.D. are more similar than different. A lot of being a Ph.D. in anything involves spending hours and hours in a library, going over large amounts of data, dealing with various bits of administrivia. If you state that you don't enjoy the idea of a physics/math Ph.D., people are going to wonder why you think a finance Ph.D. is going to be better.

Something about SOP's is that you should be positive. After all, I'm not going to be a lion tamer or a pastry chef, but if I apply for a job, I'm not going to list the thousands of jobs that I want to apply for. If you go for a Ph.D. in finance, you should mention why finance.

Duly noted.

So if you are going to do a Ph.D., why not get one in physics or math.

Chances are I will go for that. Finance is more of a "what if" kind of thing. I have changed my mind of various things before, who's to say I won't on that? The only thing that's pretty much remained constant is that I enjoy doing hard stuff. Boy did that come out *wrong*...

Lots of linear algebra. Also if you want to do graduate work in economics, you really should take a "real" statistics and probability course or the equivalent.

While my local university does not offer double majors, they do offer a minor in maths, so I could see if I can take their stats classes. The stats department died and I'm not sure if we're allowed to get minors in things they haven't pre-assigned.

I'm also looking at other schools. There's the Jacobs University in Bremen (anybody heard anything about it?) which *looks* good. It's really new, so one can never know. But it's willing to offer financial aid if one has good grades, so I'm going to shoot for that as well. I've looked through their course handbooks for maths and physics and they have all the courses that's expected to be found in any typical course of either subject. For maths, they also say that it's designed with the idea in mind, that one will go for a PhD. The other attractive thing about the course is that it gets more flexible in the final year, which is good news for me.

 

[Pyrrhus]

I
That's another reason why I don't see the point in doing a BS/BA in economics or finance. While getting straight to the upper-level coursework would indeed be tough work, I find that spending three/four years doing maths/physics to be time better spent. But hey, that's just me.

I agree. I think it is better to do a BS in Applied Math or Engineering Science/Physics, and then do a PhD in Economics, but hey that's just me. However, there are key different between PhD in Econ vs. PhD in Finance. One important one is that Econ as a science is more established than Finance. I'll bet a PhD in Finance is relatively compared to PhD in Economics, and thus the point is how respected that is?.

 

[Mépris]

I agree. I think it is better to do a BS in Applied Math or Engineering Science/Physics, and then do a PhD in Economics, but hey that's just me. However, there are key different between PhD in Econ vs. PhD in Finance. One important one is that Econ as a science is more established than Finance. I'll bet a PhD in Finance is relatively compared to PhD in Economics, and thus the point is how respected that is?.

:)

I suspect there might have been a typo in the last sentence. Either that or I didn't get it. In any case, could you elaborate on this? Cheers.

 

[Pyrrhus]

:)

I suspect there might have been a typo in the last sentence. Either that or I didn't get it. In any case, could you elaborate on this? Cheers.

There is, I forgot to write NEW. Economics is been around for quite a while and it was mathematized in the early 1900s, and finally it achieved golden age in its mathematization with the work of Paul Samuelson. In contrast, PhD in Finance are relatively new.

 

[Mépris]

There is, I forgot to write NEW. Economics is been around for quite a while and it was mathematized in the early 1900s, and finally it achieved golden age in its mathematization with the work of Paul Samuelson. In contrast, PhD in Finance are relatively new.

Who gets a PhD for respect alone, though? Apparently, in industry it is, which ultimately, is all that matters, no?

 

[Pyrrhus]

Who gets a PhD for respect alone, though? Apparently, in industry it is, which ultimately, is all that matters, no?

It's a matter of Jobs. PhD degrees that are not respected may find a difficult time finding a job. However, I may be wrong. In the end, I think you should probably do more research about those PhD. See if you can find out where do PhD in Finances go after graduation.

 

[Mépris]

It's a matter of Jobs. PhD degrees that are not respected may find a difficult time finding a job. However, I may be wrong. In the end, I think you should probably do more research about those PhD. See if you can find out where do PhD in Finances go after graduation.

Check this out:
http://manageurs.fr/anciens_partenaire.php

One of the perks of being a graduate of a "big school". I'm guessing a PhD or Masters' grad in Finance from HEC Paris wouldn't have a hard time at all.

 

[inknit]

Urch Forums is a great resource for advice on preparation for graduate studies in economics or finance.

I've been told the strongest signal, course wise, for ad coms is getting an A in real analysis (undergrad and grad if possible).


So if you haven't already, I'd take analysis immediately. You can put off complex variables.

 

[Pyrrhus]

Check this out:
http://manageurs.fr/anciens_partenaire.php

One of the perks of being a graduate of a "big school". I'm guessing a PhD or Masters' grad in Finance from HEC Paris wouldn't have a hard time at all.

That's good, but also remember then the branding element. If you'll pursue a PhD in Finance, attend those schools. The schools where employers go hire their graduates of PhD in Finance.