Why isn’t Economics Popular?

[BigClout]

Title is basically the question.

In my experience Economics sounds like the great preparation for most of the roles in Quant Finance. Everything except Dev and maybe Pricing. Risk Management, Trading and Research though sound like they fit exactly what you would learn from a good BSc into MSc Economics, Econometrics of Financial Economics programme. So why is it almost never targeted and rarely suggested as what people should take? Macroeconomic modelling really doesn’t sound too dissimilar to Research in particular (obviously they’re doing real economic variables rather than financial variables but they will likely be educated in both contexts). Some may say the mathematics (not statistics) isn’t high level enough but even Bachelors Economics programmes can give you exposure to ODEs and PDEs, let alone the masters programmes where any one worth it’s salt is going much further beyond that sort of level and the basis of modern microeconomics is genuinely just mathematical modelling.

I have some thoughts about why:

1. Programming - loads of Econ programmes only use statistical software rather than general purpose programming languages. Even R doesn’t seem like enough these days. You’d almost never find an Econ grad educated in C/C++ and since most low latency desks use this you’re immediately at a disadvantage, especially as a Trader or Dev who have either code quickly or code a lot.

2. Variation - i don’t know any other course that differs in quality so drastically. Some programmes are almost entirely intuition, whereas others feel like you’re studying Applied Mathematics. As a recruiter, I could understand why you would put someone from this background at the bottom of your pile compared to say a Physicist or Engineer who you have a much better idea of what they will know.

What are your thoughts? Would love to get an idea from people in the industry.

It does seem like it varies. I’ve seen plenty of people in Risk Manahement with Economics backgrounds. It seems like mainly in the PM, Trader, Researcher, Developer, Engineer areas where there is a gap.

 

[ajjjw]

Why would you study something general when you want to do something specific?

Also, im going to make an assumption given your spelling of "programme" that you are either in the eu or uk. Econ MSc degrees at oxford, or toulouse, or bocconi, etc are much more rigorous than the ones offered in the US (save for a few) and this forum is mostly dedicated to talking about US programs.

 

[BigClout]

Why would you study something general when you want to do something specific?

Also, im going to make an assumption given your spelling of "programme" that you are either in the eu or uk. Econ MSc degrees at oxford, or toulouse, or bocconi, etc are much more rigorous than the ones offered in the US (save for a few) and this forum is mostly dedicated to talking about US programs.

Hi thanks for getting back to me.

For your first point, I’m not sure I agree given that the most recommended courses seem to be Maths and CS, with others being Physics, Engineering and Data Science. The first 2 are even more general, the next 2 aren’t but are applied to completely irrelevant topics and the last one is also pretty general. The thing they have in common is the skills. My point is that Econ is teaching you the relevant skills whilst also some applications (e.g.: many Econ programmes will have pure finance modules, and you’ll often tackle financial problems in Econometrics, Monetary Econ, Macroeconomics, Financial Economics). I’d actually argue, when it comes to Quant Finance, other than taking an MFE, which seems like it’s no longer the preferred option these days, Economics, Econometrics or Financial Economics would be the most specific courses you could take for Quant Finance. If you’re talking about comparing MFE to Econ, then yes I take your point, but MFE still isn’t that desirable compared to the others I mentioned, at least these days. Perhaps as you said, this is due to a difference in region and the case in the US, where the MFE programmes are much better quality on average and there are more jobs available. This is what I’m noticing in Europe though, MFEs make up a very small proportion of who actually ends up as a glamorous buy-side quant.

You are correct in the understanding that I’m from the UK, good spot mate that’s not something I’d notice lol. That’s an interesting insight though. I actually came to this after looking at the Oxford MPhil in Economics and MSc Financial Economics (the former being much more of the type of quality Econ programme I was talking about, whereas the latter is more of an Econ programme for someone who hasn’t done Econ already, like a Finance grad). LSE Econometrics and Mathematical Economics gave me similar thoughts. Interesting to hear about the Toulouse and Bocconi programmes. I’ve never heard of their quality and will look into them. Thanks for letting me know.

 

[Daniel Duffy]

Also, im going to make an assumption given your spelling of "programme" that you are either in the eu or uk.

This is the correct spelling in this case.

Bachelors Economics programmes can give you exposure to ODEs and PDEs,
Maybe not hard enough for more hard quant role.

Online Courses :: Datasim

www.datasim.nl

 

[ajjjw]

Also, im going to make an assumption given your spelling of "programme" that you are either in the eu or uk.

This is the correct spelling in this case.

True, but you typically see Americans drop the -me

 

[ajjjw]

Hi thanks for getting back to me.

For your first point, I’m not sure I agree given that the most recommended courses seem to be Maths and CS, with others being Physics, Engineering and Data Science. The first 2 are even more general, the next 2 aren’t but are applied to completely irrelevant topics and the last one is also pretty general. The thing they have in common is the skills. My point is that Econ is teaching you the relevant skills whilst also some applications (e.g.: many Econ programmes will have pure finance modules, and you’ll often tackle financial problems in Econometrics, Monetary Econ, Macroeconomics, Financial Economics). I’d actually argue, when it comes to Quant Finance, other than taking an MFE, which seems like it’s no longer the preferred option these days, Economics, Econometrics or Financial Economics would be the most specific courses you could take for Quant Finance. If you’re talking about comparing MFE to Econ, then yes I take your point, but MFE still isn’t that desirable compared to the others I mentioned, at least these days. Perhaps as you said, this is due to a difference in region and the case in the US, where the MFE programmes are much better quality on average and there are more jobs available. This is what I’m noticing in Europe though, MFEs make up a very small proportion of who actually ends up as a glamorous buy-side quant.

You are correct in the understanding that I’m from the UK, good spot mate that’s not something I’d notice lol. That’s an interesting insight though. I actually came to this after looking at the Oxford MPhil in Economics and MSc Financial Economics (the former being much more of the type of quality Econ programme I was talking about, whereas the latter is more of an Econ programme for someone who hasn’t done Econ already, like a Finance grad). LSE Econometrics and Mathematical Economics gave me similar thoughts. Interesting to hear about the Toulouse and Bocconi programmes. I’ve never heard of their quality and will look into them. Thanks for letting me know.

I was interested in econ PhD programs for a bit and there are some other dedicated forums similar to this one and the general wisdom is that if you want to strengthen your profile before applying to PhDs you can do so by doing an MSc in Europe. The program you mention at LSE is a common choice iirc. Barcelona School of Econ is also a common destination along with bocconi, tse, paris school of econ, etc. but I cannot speak at all to how these programs feed into buy side roles.

 

[BigClout]

I was interested in econ PhD programs for a bit and there are some other dedicated forums similar to this one and the general wisdom is that if you want to strengthen your profile before applying to PhDs you can do so by doing an MSc in Europe. The program you mention at LSE is a common choice iirc. Barcelona School of Econ is also a common destination along with bocconi, tse, paris school of econ, etc. but I cannot speak at all to how these programs feed into buy side roles.

This is massively helpful mate. Could you share the name of the forum where I can see these discussions? I’d love to get an idea of the programmes they think are the most quantitative, as we’ve discussed that the quality of programmes can vary incredibly widely.

Could I ask what you work on at the moment?

 

[ajjjw]

This is massively helpful mate. Could you share the name of the forum where I can see these discussions? I’d love to get an idea of the programmes they think are the most quantitative, as we’ve discussed that the quality of programmes can vary incredibly widely.

Could I ask what you work on at the moment?

No problem! The forum is https://www.urch.com/forums/ you'll see the focus in almost entirely dedicated to graduate economics rather than finance. I work at the fed currently.

 

[BigClout]

No problem! The forum is https://www.urch.com/forums/ you'll see the focus in almost entirely dedicated to graduate economics rather than finance. I work at the fed currently.

Super helpful mate and clearly you know what you’re talking about. Thanks very much for the insight!

 

[Daniel Duffy]

A bit off topic, nuance is

As George Bernard Shaw said: "England and America are two countries separated by a common language"

Oscar Wilde->
"We have really everything in common with America nowadays except, of course, language."

 

[blrichard]

It seems grad level econ does place fairly well into quant, but at that point you still aren't at the quantitative level of a math or stats msc. It generally does show that you've at least gone through multivariable calc, lin alg, and maybe DEs, and a good amount of econometrics. If you do the right things chances are you've had a lot of exposure to time series. I've seen someone who did a bachelors in both stats and econ at my school say that the time series econometrics class was much more rigorous and useful than the time series course in the stats department. Econometrics has made great contributions in time series, i.e Engle, Bollerslev, Hansen, and Diebold are all econometricians.

I've had professors say though that their students who do work in quant report that econometrics is more reflective of the work they do than stats, but stats gets you to a level of rigour and also familiarity with programming you often don't get with base econometrics. I'm in advanced undergrad econometrics now and it does get closer to mathematical stats as it goes on, just with a greater focus on linear regression models. It seems the main benefit of econometrics is they start working outside of iid and "clean" data very early on which is more representative of what you see in the real world.

 

[inezyu_millet]

As a third-year finance student, I can offer some insights into why Economics might not be as commonly suggested or targeted for roles in Quant Finance, especially in areas like PM, Trader, Researcher, Developer, and Engineering.

First, Most of us are not so complete with programming skills: Many Economics programs often focus more on statistical software rather than general-purpose programming languages like C/C++. The quantitative finance industry heavily relies on programming, especially for low-latency trading desks. Knowledge of languages like C/C++ is crucial, and a lack of exposure in Economics programs can be a disadvantage.

Second, as you refer to "Economics" rather than "Finance", I'd like to say that there is a decrepency of specialized knowledge. Quantitative finance often requires specialized knowledge in financial instruments, derivatives, and pricing models. While Economics provides a solid foundation in economic theory, it might not delve deeply into the specific financial instruments and models used in the industry. This can be a gap that other disciplines like Finance, Mathematics, or Engineering may fill more directly.

Also, as you mentioned, the quality of Economics programs can vary significantly. Some may focus more on intuition, while others may offer a more mathematical and applied approach. This variation makes it challenging for recruiters to assess the skill set of candidates from Economics backgrounds, as there isn't a standardized expectation.

Last, there might be perceptions in the industry that candidates from more quantitative disciplines, such as Physics or Engineering, have a more rigorous training in mathematical modeling and problem-solving. These disciplines might be seen as more directly aligned with the demands of quantitative finance roles.

Despite these challenges, as you've observed, Economics graduates are well-represented in Risk Management roles. It's crucial for individuals interested in quantitative finance from an Economics background to supplement their education with programming skills, relevant coursework, and perhaps even additional certifications or degrees that address specific quantitative finance requirements. Industry internships and networking can also play a significant role in overcoming potential biases in the recruitment process.

 

[blrichard]

As a third-year finance student, I can offer some insights into why Economics might not be as commonly suggested or targeted for roles in Quant Finance, especially in areas like PM, Trader, Researcher, Developer, and Engineering.

First, Most of us are not so complete with programming skills: Many Economics programs often focus more on statistical software rather than general-purpose programming languages like C/C++. The quantitative finance industry heavily relies on programming, especially for low-latency trading desks. Knowledge of languages like C/C++ is crucial, and a lack of exposure in Economics programs can be a disadvantage.

Second, as you refer to "Economics" rather than "Finance", I'd like to say that there is a decrepency of specialized knowledge. Quantitative finance often requires specialized knowledge in financial instruments, derivatives, and pricing models. While Economics provides a solid foundation in economic theory, it might not delve deeply into the specific financial instruments and models used in the industry. This can be a gap that other disciplines like Finance, Mathematics, or Engineering may fill more directly.

Also, as you mentioned, the quality of Economics programs can vary significantly. Some may focus more on intuition, while others may offer a more mathematical and applied approach. This variation makes it challenging for recruiters to assess the skill set of candidates from Economics backgrounds, as there isn't a standardized expectation.

Last, there might be perceptions in the industry that candidates from more quantitative disciplines, such as Physics or Engineering, have a more rigorous training in mathematical modeling and problem-solving. These disciplines might be seen as more directly aligned with the demands of quantitative finance roles.

Despite these challenges, as you've observed, Economics graduates are well-represented in Risk Management roles. It's crucial for individuals interested in quantitative finance from an Economics background to supplement their education with programming skills, relevant coursework, and perhaps even additional certifications or degrees that address specific quantitative finance requirements. Industry internships and networking can also play a significant role in overcoming potential biases in the recruitment process.

Economics has the advantage of usually having a lot of econometrics though. Usually finance degrees are quite a lot less quantitative than economics. In my finance undergrad I had to go out of faculty to take econometrics courses, there's 7 courses in the econ faculty and only 2 in finance, which run really infrequently due to lower interest.

 

[inezyu_millet]

Indeed, thank you for reminding me of this point!