Aren't we supposed to be deeper trained in understanding how the markets work? Or is this finance PhD thing nothing but a Ponzi scheme - we are taught how to write garbage in order to teach the next gen PhDs how to do the same?
Why do hedge funds prefer MFE over finance PhD?
-
Aren't we supposed to be deeper trained in understanding how the markets work? Or is this finance PhD thing nothing but a Ponzi scheme - we are taught how to write garbage in order to teach the next gen PhDs how to do the same?
MFE Will know how to implement a strategy from end to end. PhD in Finance usually are not good programmers. Another thing, mostly MFE guys have previous work experience.
The buck of the really interesting research are not done in academia.... HF researchers have a higher expertise than most finance profs.
-
Aren't we supposed to be deeper trained in understanding how the markets work? Or is this finance PhD thing nothing but a Ponzi scheme - we are taught how to write garbage in order to teach the next gen PhDs how to do the same?
Finance PhDs understand empirical anomalies, but have no original insight into how markets work. For evidence, check out AQR's track record.
-
PhD graduates tend to be theoretical. Recruiters can easily check their transcripts (or even syllabi) what they learned during study. MFE graduates are more practical and relevant to industry.
PhD program trains students to write and publish papers, whereas hedge funds are interested to see students with sufficient practical trainings.
-
Here's my stab at the answer from a guy who had taught MFEs.
- There are simply many more MFEs than finance PhDs. It's a simple numbers game and no wonder you see many more MFEs in industry than the latter.- Many MFEs have impressive industry and/or academic backgrounds. Some have several years in the finance industry and simply want to study further. Some MFEs used to study engineering, math, physics, and some even had PhDs in those fields. This background combo makes them very marketable.
- Enough about the merits of MFEs. Your average finance PhD is also to blame here. All else being equal, your average finance PhD student nowadays is simply not technically strong --- whether it be in programming, mathematics or econometrics. Most spend 5+ years getting some proprietary dataset, identifying some discontinuity event, reg y x, and then telling a story. Sure, the end product is a 60+ page JMP, but if you think about it, these JMPs are quite "technique-lite". And it doesn't help that most JMP topics are completely irrelevant (recall that a recent JF article studies CEO hospitalization events. Do you think really any bank / fund cares?).
-
Having a PhD signals that you’re reliable and willing to plug away at the same set of minutiae for years, which may not be right for lots of industry jobs.
Some careers need risk-takers with a short attention span—Musk dropped out of grad school after a few days, for example.
-
Here's my stab at the answer from a guy who had taught MFEs.
- There are simply many more MFEs than finance PhDs. It's a simple numbers game and no wonder you see many more MFEs in industry than the latter.
- Many MFEs have impressive industry and/or academic backgrounds. Some have several years in the finance industry and simply want to study further. Some MFEs used to study engineering, math, physics, and some even had PhDs in those fields. This background combo makes them very marketable.
- Enough about the merits of MFEs. Your average finance PhD is also to blame here. All else being equal, your average finance PhD student nowadays is simply not technically strong --- whether it be in programming, mathematics or econometrics. Most spend 5+ years getting some proprietary dataset, identifying some discontinuity event, reg y x, and then telling a story. Sure, the end product is a 60+ page JMP, but if you think about it, these JMPs are quite "technique-lite". And it doesn't help that most JMP topics are completely irrelevant (recall that a recent JF article studies CEO hospitalization events. Do you think really any bank / fund cares?).But they study mathematical finance, numerical methods, stochastic processes etc. in their coursework. Do they forget all that while running their regressions?
-
I have hired and supervised both. With exceptiions obviously I prefer PhDs. Going to a PhD program selects for intellectual curiosity. This tends to lead to better investment ideas, less of a grinding mentality. Sell side might be different.
Do you hire from AFA?
-
No, economists are not trained in anything except sell papers to journals. Fake science.
MFE know how to code.Aren't we supposed to be deeper trained in understanding how the markets work? Or is this finance PhD thing nothing but a Ponzi scheme - we are taught how to write garbage in order to teach the next gen PhDs how to do the same?