Economics is the social science that studies the production, distribution, and consumption of goods and services.
Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics analyzes basic elements in the economy, including individual agents and markets, their interactions, and the outcomes of interactions. Individual agents may include, for example, households, firms, buyers, and sellers. Macroeconomics analyzes the entire economy (meaning aggregated production, consumption, savings, and investment) and issues affecting it, including unemployment of resources (labour, capital, and land), inflation, economic growth, and the public policies that address these issues (monetary, fiscal, and other policies).
Financial economics is a branch of economics that analyzes the use and distribution of resources in markets in which decisions are made under uncertainty. Financial decisions must often take into account future events, whether those be related to individual stocks, portfolios or the market as a whole.
Financial economics employs economic theory to evaluate how time, risk (uncertainty), opportunity costs and information can create incentives or disincentives for a particular decision. Financial economics often involves the creation of sophisticated models to test the variables affecting a particular decision. Often, these models assume that individuals or institutions making decisions act rationally, though this is not necessarily the case. Irrational behavior of parties has to be taken into account in financial economics as a potential risk factor.
Scope of Financial Economics
Financial economics is the branch of economics characterized by a "concentration on monetary activities", in which "money of one type or another is likely to appear on both sides of a trade". Its concern is thus the interrelation of financial variables, such as prices, interest rates and shares, as opposed to those concerning the real economy. It has two main areas of focus: asset pricing (or "investment theory") and corporate finance; the first being the perspective of providers of capital, i.e. investors, and the second of users of capital.
The subject is concerned with "the allocation and deployment of economic resources, both spatially and across time, in an uncertain environment". It therefore centers on decision making under uncertainty in the context of the financial markets, and the resultant economic and financial models and principles, and is concerned with deriving testable or policy implications from acceptable assumptions. It is built on the foundations of microeconomics and decision theory.
Financial economics builds heavily on microeconomics and basic accounting concepts. It also necessitates familiarity with basic probability and statistics, since these are the standard tools used to measure and evaluate risk.
Skills and Competencies needed by Financial Economists
- Analytical skills. Economists must be able to review data, observe patterns, and draw logical conclusions, analysing research methods, data, conclusions and recommendations...
- Communication - presenting findings and explaining complex data
- Numeracy - handling complex data and applying mathematical and statistical analysis methods
- Problem solving - extracting information, drawing conclusions and making recommendations
- Computing - using specialised software
- Time management - completing specific tasks within designated time frames
- Critical-thinking skills. ...
- Detail oriented. ...
- Math skills. ...
- Writing skills.
Career Opportunities for Financial Economics Graduates
- Actuarial analyst.
- Chartered accountant.
- Chartered certified accountant.
- Chartered public finance accountant.
- Data analyst.
- Financial risk analyst.
- Forensic accountant.
- Market Research Analyst...
- Economic Consultant. Economic consultants use analytical and research skills to carry out studies regarding economic scenarios. ...
- Compensation and Benefits Manager. ...
- Actuary. ...
- Credit Analyst. ...
- Policy Analyst...
Admission Requirements for Studying Financial Economics in Nigeria
For most high institutions in Nigeria, to study financial economics under economics as a course, you need to meet specific academic requirements. Candidates seeking admission through the Jamb are required to have five credit level passes in the Senior Secondary Certificate Examination (S.S.C.E.) or its equivalent.You require; Five SSCE credit passes in English Language, Mathematics, Economics and any two of Arts or Social Science subjects.
For Jamb UTME, English language Economics, Mathematics and any of Government, History, Geography, Lit-in-English, French and CRK. are required. For most universities Literature in English is required. Please check Jamb brochure for requirements for each school.