Economics, according to the American Economic Association, can be defined several ways. It can be described it as the study of how people use resources and respond to incentives; or, as the study of scarcity; or, as the study of how people make decisions.
No matter how you define economics, its subject is massive and of critical import, so it should come as no surprise that the field is subdivided into many areas of specialization. The study of the economic behavior of individuals, for example, is called microeconomics; the study of how psychological factors impact our response to incentives is called behavioral economics; and the study of how economic forces work in financial markets is called financial economics.
__(Food for thought: Who Should Get a Master of Science in Financial Economics?)__
Financial economists study transactions that involve money on both ends, such as stock purchases and foreign currency exchanges. They apply the principles of economics as well as the analytical tools used by quants (big data mining and processing, advanced mathematical analysis) to determine the fair value of monetary assets and to predict impending risk. Financial economists work in commercial banking, investment banking, asset management, public policy, healthcare, real estate, technology, and any other sector where finance and economics converge.
So what is the most effective academic pathway into the world of financial economics? Options are limited: many certificate programs are offered at the undergraduate level only, and few MBA programs offer a concentration in financial economics. That leaves either a master’s in financial economics or a PhD in financial economics as your best choices for graduate study in the field.
Of the two, the PhD is more likely to lead to a career in academia, while the master’s degree will prepare you for a career in banking, business, and the public sector. Many schools that offer the PhD (e.g. University of Chicago, Carnegie-Mellon University) do not admit terminal master’s students. They award the master’s degree in financial economics only as a stepping stone toward the PhD.
A master’s in financial economics can be an MSFE (Master of Science in Financial Economics) or a MAFE (Master of Arts in Financial Economics); either way, the program should be STEM-designated, meaning it qualifies international students for a 24-month extended visa in the United States.
The degree is typically offered jointly through a university’s business school and economics department, with a core curriculum that includes microeconomics, macroeconomics, financial modeling, forecasting, options and derivatives, fixed income securities, and risk management. Computer science is also covered, either as a core course or through electives. Students are expected to have a strong background in mathematics (economic statistics, linear algebra, and intermediate calculus) and computer programming (C++ and/or Python) prior to commencing the program.
Which financial economics master’s program is best for you? As you review your options, consider the four Cs: curriculum, convenience, cost, and career advancement opportunities.
Curriculum MSFE programs cover economic theory, the fundamentals of finance, mathematical analysis, and computer science. Different programs weight these subjects differently in their curricula; review course offerings to ensure that the program fits your educational objectives. Some programs are affiliated with the Chartered Financial Analyst (CFA) Institute, a strong indicator that the curriculum is tailored to prepare students for CFA certification. Programs associated with a PhD program tend more toward theoretical approaches than practical applications.
Programs also vary in the amount of customization they offer. Some require a relatively small core curriculum with lots of electives; others are nearly all core curriculum, with only a few elective options. If you’re interested in a particular elective, ask an admissions counselor how frequently it is offered; some schools pad their elective lists with infrequently offered courses.
Convenience When it comes to convenience, it’s difficult to beat online education. Online degrees allow you to forgo the cost and hassle of relocation, plus they are usually offered in a part-time format that allows you to continue working while you study. Unfortunately, online options for this highly specialized degree are limited, and you may not find one that is a good fit for you.
Local universities are clearly the next-most convenient choice, but again, not that many schools offer this degree. If the program is offered nearby, you will have to weigh the benefits of remaining local against the expense and other challenges of relocating in order to attend a distant (and presumably more prestigious) institution.
Experts in this field tend to cluster in large financial centers (New York City, Boston, San Francisco) and, accordingly, that’s where the top programs are usually located. Unless you live in one of these cities already, you will likely have to relocate to pursue the MSFE full-time.
Cost MSFEs vary widely in cost. Texas residents pay about $6,400 per year in tuition and fees at West Texas A&M UniversityWest Texas A&M University, while nonresidents pay about $14,600, minus a substantial waiver the school provides for the first semester of study only. Columbia University, at the other end of the spectrum, charges approximately $65,000 per year in tuition and fees. Both are two-year programs, pushing the price differential between the two programs into six-figure territory. And that’s not even taking into consideration the difference in the cost of living in Canyon, Texas vs. New York City. Plus, the West Texas A&M degree can be completed entirely online, further reducing its cost.
That’s not to say that a West Texas A&M MSFE is better than a Columbia MSFE, of course. All it means is that you should weigh the significant cost differential among various programs and figure that into your return-on-investment calculations.
Career advancement opportunities As you research your options online, take a look at each program’s internship and post-graduation placement data. Not all schools provide them, and in fact many financial economics programs do not (the reasons for this are not clear).
Brandeis, one of the few financial economics programs to list salary data for its graduates, reports an average salary of $68,000 “with salaries ranging up to $100,000 based on industry and experience.” You may wish to contact an admissions officer at each program you are considering to ask for this data. Different schools receive favorable treatment from different employers, so job placement data can give you a good idea of what sort of opportunities an MSFE from a particular institution will provide.
What is economics? Understanding the Discipline, American Economic Association. Retrieved March 7, 2019
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