University Senate                                                         

Proposed: January 29, 2010
Adopted: January 29, 2010 by voice vote with one nay and one abstention

 

RESOLUTION TO ESTABLISH A PROGRAM LEADING TO
THE MASTER OF SCIENCE IN FINANCIAL ECONOMICS
(GRADUATE SCHOOL OF BUSINESS)

 

WHEREAS, there is a need for analytically trained, industry-focused financial economists with an understanding of dynamic asset pricing, portfolio allocation, optimal contracting and other topics central to equilibrium financial economics, and

WHEREAS, graduates with such training will be highly attractive to investment and commercial banks, investment managers, consulting firms, and policy organizations, and

WHEREAS, there is a demand by those who wish to change careers or pursue a narrower course of study than that offered by M.B.A. programs, and

WHEREAS, there is also a demand for a program that may either provide the foundation for a Ph.D. or serve as an end in itself, and

WHEREAS, such a program may appeal to foreign nationals who receive funding to study abroad but do not enroll in a degree program, and

WHEREAS, there is a demand for professionals who are expert at completing directed research projects rather than selecting the problems to be solved, and

WHEREAS, the new degree will provide an opportunity for a more intensive course of study than that provided by a finance concentration in the M.B.A. program, and

WHEREAS, the proposed program will not replace or duplicate any existing program,

THEREFORE, BE IT RESOLVED  that the Senate establish the Master of Science in Financial Economics.

BE IT FURTHER RESOLVED that the Education Committee shall review the program in five years.

Proponent:
Committee on Education

 


Columbia University internal approval section

PURPOSE AND NEED

1) Purpose
A) Describe the purpose of the proposed program and the professional and educational assumptions that underlie it.
In order to prevent duplication of efforts, insert here the 250 word program summary that you have prepared for the NYSED part of this proposal

Columbia Business School proposes a Master of Science in Financial Economics degree. It is intended to fulfill a need for analytically trained, industry focused, financial economists with an in-depth understanding of the nature of dynamic asset pricing, portfolio allocation, optimal contracting and other topics central to equilibrium financial economics. Graduates with this training will be highly attractive to investment and commercial banks, investment managers (including hedge funds), consulting firms, and policy-oriented organizations. 

This degree program will target individuals who wish to switch careers and/or pursue a more narrowly focused course of study than is characterized by MBA programs. The program may also attract candidates who are interested in a finance PhD but are not yet ready to commit to a longer course of study.  We also anticipate that the program will be appealing to foreign nationals, who receive funding to study abroad, but often spend an extended period in the U.S. taking classes without enrolling in a degree program.

The program will require four semesters (20 months) of study at the Columbia Business School. Students will complete at least 16 courses (48 credits) for graduation.  A thesis, with academic or industry focus, will also be required. 

In today’s job market, the technical skills and expertise gained through the course work offered by the PhD program are highly valued. The focus of the program will be to create practitioners who are experts at completing directed research projects, rather than individuals (PhD graduates) who are experts in selecting the problems to be solved.

 

B) How does the new program relate to ongoing programs? Will it replace any existing program(s)?

This new degree will fill a gap in the Business School’s current degree offerings by providing an opportunity for individuals to pursue a more intensive, in-depth course of study than provided by a finance concentration in the MBA program.  The program will be distinct from the MBA because of its state-of-the-art analytical research focus rather than a broad based general management focus.

The program will also be distinguished from the PhD program by serving those students who, in most cases, plan to deploy their technical expertise toward careers in consulting or industry, rather than careers in university teaching.

The proposed program will not replace any existing programs

The position of this program in the intellectual life of the school may be explained as follows: Doctoral study trains students not only to solve sophisticated problems but also to select the important problems to be solved.  The MBA program trains students to create organizations and to manage them.  Our MS program is designed for students who are attracted to the art and challenge of problem solving without wishing to be put in a position of having to define what is “interesting” original research.  It will therefore be mandatory for the MS students to complete at least 10 PhD courses because, only in doing so, will they be exposed to the level of thoroughness, technique, and sophistication expected of them in a formal research capacity.

The Finance and Economics Division at Columbia Business School is fully committed to making the Master of Science in Financial Economics the pre-eminent degree program of its type in the U.S.

 

C) Does the proposed program completely or partially duplicate (an) existing program(s) in any other unit of the University?           

The proposed program will not completely or partially duplicate any existing programs in any other part of the University.

Contrast with the Financial Engineering MS Program offered in SEAS and the Math of Finance Program offered by the Department of Statistics

The principal focus of these programs is derivatives pricing, and the computational tools available for undertaking such calculations. While students in the MS programs may take related courses as electives, financial engineering, per se, is not an emphasis of the proposed program.

Our goal is rather to give the students a depth of broad financial intuition, hence the prominent place that Microeconomic theory, General Equilibrium theory, Macroeconomic theory, and Finance theory occupy in our program.  Recognizing that our students are most likely to be involved in empirical asset pricing exercises during their period of initial employment, the required statistics and econometrics courses with this emphasis figure prominently in the program as well.

 
D) Does the proposed program rely to a significant extent on courses that are offered by other units of the University?

The proposed program does not rely to a significant extent on courses that are offered by any units of the University other than the Business School.

2) Need

A) Why is the proposed program needed locally, statewide or nationally?

There is a need for more analytically trained, industry focused, financial economists with an in-depth understanding of the nature of dynamic asset pricing, portfolio allocation, optimal contracting and other topics central to equilibrium financial economics. Interactions across various securities markets both domestically and internationally mandate a general equilibrium perspective.  It is also the only perspective that formally considers interactions with the macro economy.  Indeed, it has been argued that the recent financial crisis was due, in large measure, to large financial firm’s inability to assess the consequences of their decisions in general equilibrium terms. The Business School thus foresees that graduates with this training will be highly attractive to investment and commercial banks, investment managers (including hedge funds), consulting firms, and, especially, policy-oriented organizations. 

In the present job market landscape, we anticipate that the technical skills, statistical expertise and in-depth intuition gained through the coursework component of a PhD program will be highly valued.  For academically distinguished students who wish to emphasize these skill sets, the attainment of a Master of Science Degree in Financial Economics will position them well for careers not only in the financial service, consulting and investment management industries, but also in Governmental and Non-Governmental Organizations (NGOs.)  While the MBA degree trains students for broad management responsibilities, the MS degree will provide students with a more specialized focus, that will allow them to suggest more sophisticated solutions to business and social financial management problems.

Interest in the Program

Within Columbia College as well as in other Ivy League colleges, junior financial analyst positions at investment banks are the most highly prized and sought after entry level positions. We anticipate that some of these students will find the MS in Financial Economics an appealing alternative. These students will represent a targeted group for applications. Any foreign students seeking a significant credential for entry into the finance or consulting industries should find the program appealing as well.

 

B) Have students at the University or elsewhere requested this program? How many?

While we have not polled students regarding the creation of this program, we intend to begin the program with a very small enrollment in order to gauge demand and build the program over time.    Doing so will allow us to assess the market demand very concretely.

 

 C) If the program is career or professionally oriented, have persons in the profession or
career requested establishment of the program? Have the employment needs of professionals in the field been taken into account when designing the program?

While we have not directly consulted extensively with our contacts throughout the financial services industry about the need for this program, we believe that the program will fill a critical need for expert financial economists skilled at carrying out in-depth analyses of a variety of finance-related problems.

 

D) What other institutions in the metropolitan area and in the Northeast offer similar programs? Have you consulted with them on the potential effect on their programs of our entry into the field?

While Master of Science degrees in business disciplines are offered by a number of other Business Schools, and offerings in the field are expanding, few emphasize equilibrium based financial economies.  At present, Columbia is well positioned to add an MS in Financial Economics degree to our current offerings because the Business School already has the expertise and reputation to attract and train a strong group of applicants.  

We believe that with Columbia’s reputation and its New York City location, we will expand the pool of interested MS students rather than cannibalize on the applicant pool of these other schools.

While we have not consulted extensively with our competitor schools or industry contacts about the need for this program, our intention is to begin the program with a very small number of students in order to gauge demand and build the program slowly over time. Doing so will allow us to assess the effectiveness of the program and precisely gauge the market demand.

New England:

Massachusetts Institute of Technology (MIT) has recently launched a Master of Science in Finance program.  However the focus of their program is different from the degree proposed here, and is more analogous to those offered in other departments at Columbia.

New York and New Jersey:

Princeton University offers a Master in Finance, albeit with a focus largely on computational finance, derivatives pricing and risk management.  As such, it is more in direct competition with the Mathematics of Finance program offered by the department of statistics. Nevertheless, the existence of the program confirms that there is a demand for such a course of study within an Ivy League University.  Having its focus in equilibrium financial economics distinguishes our program from Princeton’s.

With Columbia’s New York City location and the program’s position housed within a business school, we anticipate expanding the pool of interested Master of Science students rather than cannibalizing Princeton’s applicant pool. 

SUNY Buffalo also offers a Master of Science in Financial Economics degree.  Again, we believe that Columbia’s reputation and New York City location will make the proposed program more attractive to well qualified students.

Peer Schools:    

Our strongest competitor schools (Wharton, Harvard, Stanford, Kellogg, and University of Chicago-Booth) do not currently offer competing programs.  MIT (the other school in the Seven Deans’ Cohort) has, however, recently launched a Master of Science Degree in Finance as indicated above.