The field of Finance covers the economics of claims on resources. For example, money is a claim on goods and services; stocks and bonds and futures contracts are all claims on money or on commodities. Financial economists study the valuation of these claims, the markets in which they are traded, and their use by individuals, corporations, and the society at large.
At the Stanford Graduate School of Business, faculty and doctoral students study a wide spectrum of subjects. These include the pricing and valuation of assets, the behavior of financial markets, and the structure and financial decision making of firms and financial intermediaries. Investigation of issues arising in these areas is pursued both through the development of theoretical models and through the empirical testing of those models. The Program is designed to give students a good understanding of the methods used in theoretical modeling and empirical testing.
The PhD Program trains individuals in the methods of pure and applied research and is designed to build the following skills, which are required for research related, academic positions in financial economics:
- A thorough grounding in the methods of quantitative analysis and in the structure of financial institutions and markets. Modern theory is formal theory, based on the rigor attainable through use of mathematical modeling techniques. Similarly, modern empirical research uses advanced econometric tools and statistical methods.
- The ability to look at questions in new ways and to construct lucid, comprehensive analyses of the problems raised.
- The ability to express analysis orally and to participate in seminar and workshop discussions where ideas are debated and evaluated.
Preparation and Qualifications
All students are required to have, or to obtain during their first year, mathematical skill at the level of one year of calculus and one course each in linear algebra and matrix theory, theory of probability, and statistical inference. Students are expected to have adequate programming skills using languages such as FORTRAN, C, Matlab, or GAUSS, or to correct any deficiencies before enrolling at Stanford.
The Finance PhD Program involves a great deal of very hard work, and there is keen competition for admission. For both these reasons, the faculty is selective in offering admission. Prospective applicants must have an aptitude for quantitative work and be at ease in handling formal models. A strong background in economics and college-level mathematics is desirable. It is particularly important to realize that a PhD in finance is not a higher-level MBA, but an advanced, academically oriented degree in financial economics, with a reflective and analytical, rather than operational, viewpoint.