Thinking about doing a PhD in finance?
- Some insights
- More insights
- Answers to frequently asked questions (FAQs)
- Contacting the PhD coordinator in finance at UB
Before you read this, please be aware that this is merely one person's opinions about doing a PhD in finance. You obviously need to get advice from more people before making the final decision.
If you are thinking about pursuing a PhD in finance and you
want some insights, then here are some.
A PhD in finance may not be what you think it is.
First, you should recognize that finance is merely a subfield of economics. So, during your PhD in "finance," you will take many PhD level economics classes. If you did not enjoy your prior microeconomics courses, or if you do not like solving general equilibrium conditions or deriving proofs or if you do not like "theory," then you may wish to reconsider your pursuit.
Second, you will be trained to do research. In other words, you will learn how to analyze data. So, you will take a lot of graduate level classes in statistics, math, and econometrics. In fact, I feel more like an applied statistician rather than a finance person. The little bit of finance you will learn will come from reading a hundred plus academic finance papers, and almost all of those papers are highly technical (either empirically or theoretically).
And finally, once you take those grueling economics and statistics courses, you will then spend a lot of lonely hours, weeks, months, and years, empirically analyzing archival financial data and/or deriving complex, exoteric, models.
So, if you thought pursuing a PhD in finance meant you would learn high-level
finance, then you would be sort of wrong. A PhD in finance is not much
different from a PhD in any other field. While in a PhD program, you are
not exactly learning more about a specific topic. Instead, you are
expected to create and/or expand on the topic by proposing new ideas, creating new knowledge,
and making new discoveries.
Some more insights about doing your PhD in
finance....
A PhD in finance does
not
directly lead you to a career on Wall
Street. Upon completing a finance PhD, pretty much the only thing you will
be able to do is derive exoteric theoretical results and/or empirically analyze archival finance data, and
then writing up your
discoveries and findings. With a lot of diligence and a bit of luck, you will be able to publish your
research. This is pretty much what finance professors do for a living.
Conduct research, write it up, and then try to publish it. You might
wonder who would employ such a seemingly useless person. Primarily
universities.
One piece of advice I tell all prospective finance PhD students is to spend an
afternoon in the library perusing the Journal of Finance or Journal of Financial
Economics. Trying to publish in those kinds of journals is precisely what
I do for a living. And publishing in excellent finance journals is hard.
It takes me several years to publish a paper. And the rejection rate of
reputable journals is around 90%. This means a lot of very good research never
gets published in decent finance journals. Seems deflating, doesn't it? Is this
really what you want to do for the rest of your
life? Make sure before you pursue a PhD in finance.
And finally, doing a PhD in finance is freaking hard. I barely made it
through. These cartoons below do a very good job describing the
experience.
The strip below is particularly funny to me. I used to be just like that professor.
And this strip below still describes me today. In fact, this is what happened to me yesterday and last night. Professors do not keep regular 9 to 5 hours. In a way, we are always on the clock. When we do research and publish it, it contributes to our own personal brand equity. Being a professor is like being an entrepreneur. You can take as much time off as you want, but it's always at your own expense.
But don't let me discourage you. I
love this gig. I can't believe this profession exists. If you are
someone who does not need structure, is self-motivated and self-disciplined,
good at statistics, loves finance, writing, analyzing problems, and enjoys the general pursuit of
knowledge, then doing a PhD in finance would be perfect for you. Think
about it. I get paid for thinking about whatever I want to think about.
Answers to frequently asked questions (FAQs)
I think I've
answered most of the questions you might have about doing a PhD in finance.
Here are some answers to other frequently asked questions.
- Can I complete a PhD in finance in less than 5 years?
- Will work experience help me get into a PhD program in finance?
- What standardized exams are required to apply to PhD programs in finance?
-
Do PhD programs in finance consider January admissions?
- How to faculty evaluate PhD applications?
- What is the minimum GMAT score I need to get into a PhD program in finance?
- What educational background do I need to get into a PhD program in finance?
- How many PhD programs should I apply to?
- How many PhD students are accepted? How many people apply?
- What kind of funding is available to PhD students in finance?
- Can you do a PhD in finance on a part-time basis?
- What if you want to get your PhD simply to teach at the college level?
Can I complete a PhD in finance in less than 5 years?
Probably not. The average time it takes to complete a PhD in finance, is 5.5 years. This is the U.S. average among those who complete it. Having a prior graduate degree will not shorten the time it takes you to finish your PhD in finance. Almost everyone who does a PhD in finance has a graduate degree. If you don't have a prior graduate degree, then it may take you longer than 5 years. If you work really, really hard and/or if you are super smart, you might think you can finish your PhD sooner, but don't forget that most PhD students work really, really hard and are super smart (well, I was not one of those smart ones, so I ended up studying day and night just to keep up with everyone else).
Will work experience help me get into a PhD program in finance?
No. Being a finance scholar means you will have to do things like correcting the correlation between your independent regression variable and your error term (yes, yes, if you're a statistician, then you know I am referring to an endogeneity problem). A correlation here is a major econometric problem. You need to figure out how to fix it. It is difficult. If you used to be an investment banker, it won't help.
What standardized exams are required to apply to PhD programs in finance?
Most business schools prefer the GMAT. But many business schools will accept GRE scores. Check before you apply. If you are an international applicant, then you may also need to take the TOEFL. Check before you apply.
Do PhD programs in finance consider January admissions?
Most do NOT. In fact, I don't know of any PhD program that do. In the first semester (the Fall semester) of the PhD program, you will likely take PhD level microeconomics, PhD level mathematical economics, and PhD level econometrics. If you start in January, you'll get killed when you take microeconomics II, math econonomics II, and econometrics II because you didn't take the first courses in the Fall. Know what I mean?
How do faculty evaluate PhD applications?
This is a very good question. For the most part, it may be safe to say we don't know what we like until we see it. Pretty much every applicant has high test scores and high GPAs. So, something else on the application has to stand out. I will say one more thing about this though. A lot of times, faculty look for a match between the applicant's research interests and their own research interests. So, if you state in your application to UB that you're interested in exotic derivatives pricing, or macro finance, or monetary policy, or theoretical asset pricing, etc., there is a good chance your application will be rejected simply because we may not feel we will be able to satisfy your interest. That is, we're doing you a big favor.
What is the minimum GMAT score I need to get into a PhD program in finance?
Pretty much everyone who applies to our PhD program in finance has a GMAT score of at least 700. But we've accepted students with less than a 700 GMAT in a few cases.
What educational background do I need to get into a PhD program in finance?
Some finance professors feel a statistics background is important. Other helpful backgrounds include math, engineering, physics, and economics. I personally think a strong background in economics is most important. By the way, if your background is in finance, well, that is not that very useful. You need to have basic "tools." Know what I mean? If you've been studying a "soft" science up to now (and all business subjects in my opinion are "soft sciences"), then you may consider doing a masters in economics or statistics before applying to a PhD program in finance.
How many PhD programs should I apply to?
Apply to about 15-20. You never know which program you will get into. Apply to some top schools, some mid-level schools, and some lesser schools and see what happens. And be prepared to move. If you live in Buffalo, you may wish to do your PhD at Buffalo. That's ridiculous. If you want to be a scholar, then you have to be mobile. I don't think anyone in our finance department is originally from Buffalo. See how mobile we are?
How many PhD students are accepted? How many people apply?
At some large research universities, they can get around 400 applications for their PhD program in finance. They accept 2 to 4. At Buffalo, we get around 100 applications for our PhD program in finance. We accept 1 to 3.
What kind of funding is available to PhD students in finance?
At most universities, like ours, "fully-funded" PhD students get their tuitions paid for and they will get a stipend. The stipend is around 15-20k per year for about 4 years. I've also heard of higher stipends. In exchange for the tuition reimbursement and stipend, you have to work about 20 hours per week as a research assistant.
Can you do a PhD in finance on a part-time basis?
No! I wish more people would listen to this advice. Every person I know who has tried to do a PhD in finance on a part-time basis has either eventually dropped out of the PhD program or spent 7 or more years trying to finish the PhD program. Among those in the latter group, they went on to become not very productive scholars. To become a good researcher, you need to immerse yourself into your studies and be 100% dedicated while you are a PhD student. I realize that being poor for 5 years is not appealing. But you have to bite the bullet on this one. In the long run, it's best.
What if you want to get your PhD simply to teach at the college level?
I come across a lot of people who want to do their PhDs simply to teach at the college level. I have a few comments on this. First, five years in a PhD program learning to become a researcher (when you aren't interested in becoming a researcher) is a BIG sacrifice. While in the PhD program, these specific people (who are only in it just to become teachers) struggle and often become bitter. Second, being a teacher (especially when you are teaching finance) may not be as personally rewarding and satisfying as you might think. Let me illustrate with the following example. Say you have 50 students and all of them think you lecture too fast. Next semester, you slow down, but now all 50 students think you lecture too slow. So, next time, you speed it up a little bit and finally 25 students think you lecture too fast and 25 students think you lecture too slow. Logically, this means you are now finally lecturing at the "right" speed, but all 50 students still hate you. One final comment on the difficulties of being a teacher: Doing what is "popular" for the short run and doing what is "right" for the long run are rarely the same thing. If wanted to, I could give my students one True/False final exam and give everyone good grades and I'd be wildly popular. This would also be great for me too. I wouldn't have to spend hours/days/weeks grading and preparing stuff. But doing what is "popular" is not serving the greater good. My masters students are forced to take down a lot of notes during lectures, they have to complete several time-consuming projects where one of those projects include doing statistical analyses on real-world data, they have presentations and numerous case write-ups, they are forced to learn how to use a financial calculator, they are forced to learn how to trade online, and they have to take 2 challenging exams. My students learn a lot, but they also hate me.
Contacting the Coordinator of the PhD Program in Finance at UB
Professor Cristian Tiu is the guy you need to contact if you're interested in Buffalo's PhD program in finance. You can find his email address on our School of Management website.