Communities

Writing
Writing
Codidact Meta
Codidact Meta
The Great Outdoors
The Great Outdoors
Photography & Video
Photography & Video
Scientific Speculation
Scientific Speculation
Cooking
Cooking
Electrical Engineering
Electrical Engineering
Judaism
Judaism
Languages & Linguistics
Languages & Linguistics
Software Development
Software Development
Mathematics
Mathematics
Christianity
Christianity
Code Golf
Code Golf
Music
Music
Physics
Physics
Linux Systems
Linux Systems
Power Users
Power Users
Tabletop RPGs
Tabletop RPGs

Dashboard
Notifications
Mark all as read
Site Proposals

Welcome to Codidact Meta!

Codidact Meta is the meta-discussion site for the Codidact community network and the Codidact software. Whether you have bug reports or feature requests, support questions or rule discussions that touch the whole network – this is the site for you.

Finance (Not Economics)

+2
−2

Finance differs from Economics. Each deserves its Community.

Stack Exchange completely fails to distinguish their Economics, Personal Finance and Quantitative Finance sites, because they all have questions on derivatives. As a starter, let's unite all asset pricing questions into one community here.

Annex. Read the following only if you want to know how to distinguish Accounting v. Economics v. Economics.

Whats the most comprehensive finance textbook for someone with no background in finance? : finance

Accounting means keeping track of things that have already happened - Transactions, A/R, A/P, and preparing the big-three statements (balance sheet, P&L, cash flows).

Finance can include just about all of the rest of these, but in practice, it refers to forward-looking activity, such as budgeting, optimally structuring your company's debt, cost/benefit analysis, comparing the future value of alternative investments, things of that nature.

Economics looks at the biiig picture - Even "micro"economics still deals with how markets behave in the aggregate, rather than how any one transaction will go down. It deals with issues like supply and demand, fiscal policy (on the scale of governments and globally), interest rates, optimal employment levels, etc. Appropriately enough, that linked Investopedia definition refers to it as a "social science", which I never thought of before, but makes sense - Economics essentially deals with herd behavior regarding the allocation of scarce resources.

Investment has a more narrow focus like accounting, but forward-looking; it refers to evaluating how best to commit your current resources to boost future returns. Your first intro to it will typically focus extremely narrowly on how US equities markets work, how to calculate returns under a variety of situations, and how to analyze a 10K.

As for the appropriate classes, the exact name depends on the school, but they'll all have something very, very close to "accounting/finance/economics 101". An intro to investing will probably have a name more like "investment analysis" or "portfolio theory/management".

I edited this universityofauckland post.

Accounting: very little math, a bit of law/rules, mostly about understanding how companies report their financial standing. It isn’t difficult but is quite popular, will leave you quite employable but there will be a decent amount of competition. By third year you’ll understand the ins and outs of all the financial statements and how to properly provide financial reporting on the management accounting side of things too.

Economics: very theory based, you can now complete it without a strong grasp of calculus (they removed most math from many papers). Econ on its own is quite fluffy, and so is often paired with the more hard skills of accounting and finance. Econ is best for jobs in the public sector and research. By third year you’ll be applying economic models to various areas such as unemployment, trade or foreign exchange rates.

Finance: by far the most math heavy. You have to take a stage one and two mathematics paper for your finance major). Finance is less about investing and more about companies and how they do things, while accounting looks into the past (how a firm performed last year), finance looks forward (how will this firm afford capital expenditure next year). Finance also touches on investment mechanisms but is far more focused on the theoretical side. Don’t expect to be taught how to day trade. By third year you’ll be modelling revenue growth and expenses to extrapolate a firm’s cash flows for the next 10 years, then discounted it back to value a company intrinsically.

I edited this r/explainlikeimfive post.

Economics degrees, while they do have business in them, are generally more focused on the more academic aspects of economic theory and how economies function, and to make predictions of the economy and how things affect it. But many economics majors go into a lot of the same jobs that a business major would, but generally don't have the broad academic business background a business major would, across stuff like management, finance, HR, Info system, and real estate.

Finance is a business degree, focused on finance. While "finance" is fairly broad, it could encompass some or all of: Corporate finance, banking, trading, M&A, investing, and so on. It would be a business degree primarily focused in those types of areas. Finance majors go into a variety of jobs, though corporate finance positions and various banking jobs are often hiring many of them.

How much does taking a Microeconomics course help you understand the field of investing?

Finance and investing is not actually economics. Some of economics surrounds investing, but economics as a field is much wider than that. The class will likely cover the concepts behind how you theoretically make economic decisions, and not why putting your life savings into a 3x short leveraged ETF will ruin everything.

Financial economics vs finance

Less flippantly though, there's a long debate on whether finance is a subfield of economics, and this debate goes back at least to the PhD thesis of Markowitz. Prof. Milton Friedman famously opposed awarding Markowitz a PhD in economics from the University of Chicago for his portfolio theory because while Markowitz's work was brilliant, Friedman didn't consider it to be economics. I've heard Myron Scholes also express views that finance is to some extent distinct from economics.

Of course, you can find a huge range of views on whether finance is an economics subfield. Clearly much of the early work in finance was done by economists, and finance draws heavily from econometrics, time-series econometrics, and macroeconomics. On the other hand, risk-neutral pricing looks less like classic economics.

Why does this post require moderator attention?
You might want to add some details to your flag.
Why should this post be closed?

1 comment thread

General comments (8 comments)

5 answers

+0
−0

Please use this post to indicate your interest in helping to build this community. You can either edit this post (if you have the edit ability on Meta) or comment and someone else will edit it into the post.

Please indicate if you expect to be a casual or more active participant. If you anticipate primarily asking or primarily answering questions, please indicate that. If you have particular expertise, either in the topic as a whole or specific areas, please say so. We're asking these questions so we can get a sense of the community being built and whether there are important gaps.

  • Please add me. I work in the industry. — PLTR PSTH

  • Sign me up! Thanks! I majored in economics in undergrad. — Technologically illiterate‭

  • Add me please. I majored in economics in undergrad too. I have at least 300 questions. I'm not joking...I've been reading up finance. — Chgg Clou‭

  • I'm dumbfound this isn't already up and running! I think Codidact is missing out on the action! Just look at the investing subs on Reddit and Money Stack Exchange! People are flooding in because of the Game stop short squeeze! My undergrad degree is in finance. I'll definitely be active. — DNB

  • Sign me up! I'm dumbstruck too why this hasn't been launched already. My dad has a MBA and we can contribute. — Technologically illiterate‭

  • I have a PhD in economics, and I've taken some finance courses. I'd love this website to get launched! - Courtney Vaughan‭

Why does this post require moderator attention?
You might want to add some details to your flag.

1 comment thread

General comments (1 comment)
+0
−0

Just want to add that I prefer each subject to each website. They're too important and complicated to be combined on one website!

Why does this post require moderator attention?
You might want to add some details to your flag.

0 comment threads

+0
−0

Hi! Someone introduced this website to Reddit. Glad to have found you all.

I have a PhD in economics, and I've taken some finance courses. I'd love this website to get launched!

Why does this post require moderator attention?
You might want to add some details to your flag.

0 comment threads

+0
−0

At the economics community that I follow (reddit.com/r/academiceconomics), someone suggested posting here and getting this community off the ground. I actually prefer the Q&A format here.

I have a Masters and Ph.D. in economics, my specialty is macroeconomics. But I've taken many courses in asset pricing, corporate finance, and some stochastic finance.

Why does this post require moderator attention?
You might want to add some details to your flag.

0 comment threads

+0
−0

Hello everybody,

I'm a finance professor. I have a Ph.D. in finance. I follow macroeconomics everyday. I just want to second this proposal, which will be a great idea!

Thanks and regards, Mark

Why does this post require moderator attention?
You might want to add some details to your flag.

0 comment threads

Sign up to answer this question »

This community is part of the Codidact network. We have other communities too — take a look!

You can also join us in chat!

Want to advertise this community? Use our templates!