Why is there a lot of international students pursuing mfe?

[Forza]

@AWilliams,

Oh no, I didn't mean a verbal fight either. The whole thing just started out with me talking out loud. But I do agree with you on a lot of points.

 

[rishab dhar]

Hey guys I just went through the entire thread to get a gist of it. I want to ask a question: Why do fewer people from France/Germany go to study in the US.

what about France and Germany?

They have no funding issues (their per capita incomes are by far among the highest in the world).

Now consider South Korea or even Hong Kong, both of which send far more students to US than France and Germany do. Now better standard of life/jobs (at-least according to me) cannot be the reason, as the per-capita incomes are at the same level as those in rich countries. South Korea doesn't have world class universities, but what about Hong Kong (I think at-least 2-3 universities in HK are among top 100 in the world).

Now so much for universities, do they even matter?

For instance: Germany ,as we know it, is the industrial powerhouse of the world. US, whether you like it or not, just cannot compete with Germany in terms of Industrial might. US might have the best universities the world, and might have a weakening dollar (down 50% since 2001), but it still can't compete with China. It still runs massive trade deficits. Whereas, Germany, with euro that rose 100% since 2001 (0.8/$ to almost 1.6/$ now), with no world class universities (at-least by going with US news rankings), still produces world class goods that everybody wants,no matter what the price ( something like Apple). You look everywhere, Germany seems to be way ahead of US(including China and India) in terms of engineering (just drive through the featherbed Autobahns (150+ kmph is just an average), Automobile Industry, Semiconductor Industry, Sports goods etc).

Then, Germany, by far had the best economic model to weather the 2008 great depression. All those Harvard studied graduates had no clue as to what to do...

All the above things make me think : Do rankings of Universities really matter? Or are we really kidding ourselves by simply looking at the rankings posted by English newspapers (FT/US news etc) ? Perhaps there are much better universities in the non-English speaking world than in the English Speaking world. Just because English is the most widely spoken language in the world, the research publications are cited 2-3 times more than those in say French/German/Russian etc. Hence the huge difference in rankings.

If this is really the case, all the rankings are simply meaningless...

 

[AWilliams]

They are a lot of presumptions and misconceptions in this post which makes it hard to respond to. For instance, as the per-capita income levels rises, usually the demand for goods increases as well. So the tendency of buying abroad goes up, inevitably leading to a "trade deficit". There's nothing wrong with that. However, you start with the presumption that there is. Why?

If Americans became poorer, the "trade deficit" would decline.

 

[Yike Lu]

Also, I'm not sure that so many American people actually want these kinds of quant jobs. Hell...I remember one of my high school classmates...blew me out of the water in math and physics (was one of the smartest people I've ever met at the time), beautiful as all hell, got into Columbia for a BS in Financial Engineering, and even managed to intern for an investment bank. Twice.

One person (of Chinese descent) was pursuing a PhD in theoretical physics at MIT. I was the only one with a completed quantitative graduate degree. A couple of people got investment banking/other non-math financial industry positions, one person who pursued the same program as the aforementioned young woman and then went onto get an MFE at Columbia is now an assistant trader at SIG. Oh, there's one more who's working as an IE for the Navy, and I'm really happy for him.

I knew plenty of Americans at my high schools (both the math/science magnet and the public school) who went on to complete quantitative degrees, though not all at prestigious institutions.

And the grad schools are making it hard to even pursue a graduate education in anything quantitative. Duke (PhD stats), UPenn (PhD biostats), and UMich (PhD Stats and PhD OR, two separate programs) all rejected me, and my credentials aren't horrid. 770 Q GREs, 3.81 MS Stats GPA...and nope...I got shafted. (Though two of my recommendations arrived late at UMich)...heck, even my own alma mater, Lehigh, rejected me after I applied to my old department for a PhD when I got my first 4.0 at Rutgers, and SUNY Stony Brook took me for a PhD in quant finance--but with no funding.

Frankly, I think a lot of this could be solved if US citizens were prioritized in PhD programs over foreign nationals. Given how few Americans actually like math or engineering, this may actually be a sensible course of policy to get our country back on track.

You must have no sense of who your competition is.

I went to Caltech and I would give you 100:1 odds that if you gave anybody in the 7 undergrad classes I've had contact with (graduating classes of 2006-2012) the same amount of time to prepare for the GRE as you did, that the LOWEST quant score would be 770. I say this without knowing if you even studied for the GRE. As I recall, the quant section barely covers calculus, yet every Techer is required to take up through Differential Equations in math and up through Quantum Mechancis in Physics. This includes the Humanities majors.

I'd say at least half of those people are pursuing/have obtained a PhD in a quantitative subject. Of those half, I'd again estimate that half or more are US nationals.

Also, you have to realize that the biggest "credential" is the research you've done. I knew an amazing Physics major who got accepted to only one grad school (as it happens, it was MIT) because nobody else had the research he was doing (LIGO).

 

[Yike Lu]

Also, as far as why there is a large number of Chinese in quantitative disciplines -
I have posted this before, but as my parents explain it to me, the Chinese are overcompensating for their lack of quantitative education in the past, something that cost them a great deal in the last two centuries (think politics and war).

 

[tobias elbert]

There are so many factors as to why German/ French unis attract lesser international talent than the US, so I'll just name a few:

- Marketing: the US have always been far superior in marketing and selling their goods including education than their continental counterparts.

- Language: almost everyone speaks English and only a few German or French. The international students who speak French/ German are mainly from the EU zone, so if you really dug into the figures, you'd probably see a fairly high percentage of "EU zone internationals".

- Lifestyle: Living in Germany/ France without speaking the language well isn't fun AT ALL! Though I'd say that Germany has come a long way with welcoming foreign students there is still way to go!

- University life/ studying: Being the product of German high-schooling and Anglo-Saxon tertiary education, I dare say that the latter provides much more hand-holding throughout your studies through administrative bodies and lecturers alike than German unis. Same with textbooks, it's like comparing Springer vs Wiley/ Prentice-Hall and the likes. Again, I like Springer books but they involve much less hand-holding by means of examples, exercises, solutions... than the others.

You get what you pay for (in Germany usually a very small notional amount of tuition fees for domestics and internationals alike). Don't get me wrong, I am not saying that the education you receive is inferior - far from it - but the overall services, i.e. the "product education", you receive as a student in Germany are (or at least used to be).

- Publications: someone hinted at that before and it's true. A lot of German researchers write and publish in German. Hence, much less exposure to international research - though this is changing especially in Quant Finance.

There certainly are more reasons than the ones mentioned, but overall you can see why the US, UK, OZ offer a more appealing product than Germany or France. As for German/ French students (not) going to the US - why pay so many $$$ if you can receive a good quality education at home for (almost) free?

 

[Tsotne]

Right.

 

[Andy D.]

History,

Going back to one of the earlier posts, I have generally found that a good History education in the US also seems to be lacking badly.
It's probably on a decline in Europe too, however I think it has a way to go to catch up with the US.

 

[DominiConnor]

tobias makes his point well, and it's not just finance that feels that effect, but all universities in the non-English speaking world, hence the tables. The effect is so great that the European Union is commission a new methology that will make European universities look better. They are upset not only that most top unis are American but that the top 10 universities in the EU are in Britain, one college of Cambridge has won more noble Prizes than all of France put together and until the EU got much bigger recently, individual UK universities compared very well with the whole EU put together.

That's not really because Brits and Americans are smarter than Europeans, but because US/UK universities are world universities and French & German universities are French & German. When I was reviewing potential interns to learn Real programming and stuff at a UK university, the latest cohort contained not one native Brit.

There is also the issue of work permits, visas etc. In the last 20 years the anglo saxon economies have been vastly better at creating jobs for younger people, so anything which gets you started there is good for lifetime earnings.

 

[rishab dhar]

Does US even have a history? lol

Compare US's history to that of Asia (particularly China and India- whose history (civilized world) dates back to anywhere between 4500-6000 B.C) or for that matter Europe.

 

[rishab dhar]

They are a lot of presumptions and misconceptions in this post which makes it hard to respond to. For instance, as the per-capita income levels rises, usually the demand for goods increases as well. So the tendency of buying abroad goes up, inevitably leading to a "trade deficit". There's nothing wrong with that. However, you start with the presumption that there is. Why?

If Americans became poorer, the "trade deficit" would decline.

Please tell me that where in my post did I ever mention that US has become poor???

If by reading that "US cannot compete with Germany's industrial might" you infer than US became poor, you have some serious RC issues.

Now on trade deficit. Do any of these developed countries run trade deficits -Germany, Japan, Singapore, South Korea, Canada, Norway, UAE, or Australia. So how can you conclude that being developed leads to trade deficits?

Each of these countries either has a lot of resources (UAE, Norway, Canada etc) or has powerful industrial base (Japan, germany etc).

And , since you mentioned that as countries become richer, they buy abroad. But my question is : why not make at home? I'm pretty sure that in such a vast country as US there are plenty of extremely poor neighborhoods. Infact, just check out the GINI index of US and compare that to the above countries. You will find that US's is the highest (mid 40's). So income disparities are much higher in US! So, don't even give the excuse that labor costs are extremely high everywhere in US.

Now consider India (one of the fastest growing and one of the poorest countries in the world (on the basis of per capita income) runs trade deficits almost as high as UK! , and India's economy is much smaller than that of UK.

The simple reason why India runs high trade deficits is that it simply does not have any manufacturing base. This is one reason why salaries in (civil and mechanical engg (excluding oil sector) are pathetic in India) and the number of IT engineers ( CS and IT grads) outnumber other engg grads 10:1!

P.S I have studies in India.

 

[darth]

@rishab : Take the example of luxembourg , it's external debts are around 4600% of its GDP. It has a solid economy and its debts are considered among the safest with AAA ratings.

 

[rishab dhar]

@darth: solid only until it does not suffer a iceland/ireland . You very well know the consequences of even a single banking crisis on such economies. Let its banks fail, like those in iceland, and those ratings will fall faster to junk than I can complete typing this message!

Ratings- I, frankly speaking, think that they are a joke. Why was Lehman Bros rated AAA 1 month prior to its collapse? Similarly , China's A+ and UK and USA 's AAA ratings makes me laugh my head off. A creditor given a lower rating than a debtor! Seriously, If had followed the investment advice of these credit rating agencies, I would have been homeless.

Banking and real estate are perhaps the most dangerous industries invented by man. Countless countries have seen their empires devastated due to crash in banking system/real estate. Dubai only got saved because it had its oil rich brother Abu Dhabi to help it. Now most people wouldn't even have heard the name Abu Dhabi!

Now if you think otherwise, please enlighten me!

 

[AWilliams]

Please tell me that where in my post did I ever mention that US has become poor???

If by reading that "US cannot compete with Germany's industrial might" you infer than US became poor, you have some serious RC issues.

Now on trade deficit. Do any of these developed countries run trade deficits -Germany, Japan, Singapore, South Korea, Canada, Norway, UAE, or Australia. So how can you conclude that being developed leads to trade deficits?

Each of these countries either has a lot of resources (UAE, Norway, Canada etc) or has powerful industrial base (Japan, germany etc).

And , since you mentioned that as countries become richer, they buy abroad. But my question is : why not make at home? I'm pretty sure that in such a vast country as US there are plenty of extremely poor neighborhoods. Infact, just check out the GINI index of US and compare that to the above countries. You will find that US's is the highest (mid 40's). So income disparities are much higher in US! So, don't even give the excuse that labor costs are extremely high everywhere in US.

Now consider India (one of the fastest growing and one of the poorest countries in the world (on the basis of per capita income) runs trade deficits almost as high as UK! , and India's economy is much smaller than that of UK.

The simple reason why India runs high trade deficits is that it simply does not have any manufacturing base. This is one reason why salaries in (civil and mechanical engg (excluding oil sector) are pathetic in India) and the number of IT engineers ( CS and IT grads) outnumber other engg grads 10:1!

P.S I have studies in India.

You've obviously miscomprehended the post. Perhaps you should re-read. I never said that you said America was getting poorer.

But i'm always fascinated by the lack of basic economic knowledge by the people on this site who are potentially future "quants" (Whatever that term has come to mean now). You ask a guy in math class to solve a stochastic differential equation in under a minuet, he can do it. You ask him what is the primary function of a stock market or to reiterate the concept of supply and demand, he draws a blank.

The "trade deficit" is one of those terms politicians throw around to make everything seem bad and people suck this stuff up. All it means is that country X is buying more goods from country Y than Y is buying from X. There's nothing wrong with that. If you buy hamburgers from a guy working at McDonalds daily, while he has bought nothing from you, you're in a "trade deficit" with him. You simply might not have the time to make your own hamburgers.

America had a very strong industrial base in the 19th century. The economy evolved, entered into the information age, and outsourced a lot of it to countries like, well, Germany. There's nothing wrong there. Nonetheless, American industrial output is still 3.5 times larger than Germany.

This discussion, however, doesn't help to answer your question. You can choose to skip over it if you please.

 

[AWilliams]

Banking and real estate are perhaps the most dangerous industries invented by man.
Now if you think otherwise, please enlighten me!

Wow.

 

[rishab dhar]

So the tendency of buying abroad goes up, inevitably leading to a "trade deficit". There's nothing wrong with that. However, you start with the presumption that there is. Why?

You still can't prove your above argument. In my post #51 , I showed that there , in fact, is no correlation between buying abroad and high per capita income. So much for your knowledge.

Secondly, I not only talked about the amount, but also about the quality of Industrial Output. Whereas US was sagged into deep debt because of China's meteoric rise, Germany boomed because of it. Just look at the auto sales of German car makers. Now if you think that any of the big 3 US car makers, namely GM, Chrysler, and Ford, can even compete with the like of Audi, BMW, Mercedes, you gotta be joking me. Americans themselves buy more foreign made cars than those sold by Big 2, hence the decline of Detroit. I should tell you, even now the German car makers sell more cars in Germany than in US. Only now, China car sales of German car makers exceeded home sales. Also, In Euros German economy is 2.5 trillion euros, and 30% of this comes from Industry ( 750 billion euros=$1.2 trillion USD). In fact, even the sticker "made in Germany" is enough to warrant quality.

Whereas US economy is $14.5 Trillion (last time I knew), and 21% of US economy is Industry, so it works out to $2.9 trillion. So it isn't exactly 3.5 times. More like 2.5-3 times. But you Forget that US economy is almost 4 times the size of German economy.

Secondly, you talk about

The "trade deficit" is one of those terms politicians throw around to make everything seem bad and people suck this stuff up. All it means is that country X is buying more goods from country Y than Y is buying from X. There's nothing wrong with that. If you buy hamburgers from a guy working at McDonalds daily, while he has bought nothing from you, you're in a "trade deficit" with him. You simply might not have the time to make your own hamburgers.

Yep pretty well said. Just see what happened in 1970's ( US was pretty much at the mercy of the Mid-east). We'll just borrow from others, do not worry. It is this attitude that puts the country under the mercy of other countries. Now what if China say " We will sell everything at 100% higher price". What will you do. You obviously can't refuse, because you just cannot put up a manufacturing industry overnight.

Still don't get it?

Consider this : If you are always at the mercy of others for feeding you and you haven't learned to cook food, one day you enter into a quarrel with the person who cooks for you, what do you do? You can't obviously learn everything overnight. This transition will obviously be painful.

Now of course you can't cut your reliance on other to 0, but lower the better.

This attitude that "we'll let the others handle it, has drowned many a country, including India and China (in 18th and 19th century)".

Finally, as you are in trade deficit with the other person, you obviously have to pay that person in his desired currency, which at the moment still is dollar, but as you flood the market with dollars, they buy fewer products than they could. In fact, just look at this link http://en.wikipedia.org/wiki/File:US_share_of_world_GDP_since_1980.jpg. The times when the USD was the strongest were the times US contribution was the highest to the world economy. Namely 1985, when USD index hit 160 from 85, and 2000, when USD index hit 120 from 80 in 1987. While it might not matter much to you, it does to 80% of fellow Americans as the purchasing power of the dollar gets eroded. Things get cheaper as dollar rises, and hence, they can buy more.

Infact, at this time, most of thing would seem to be dirt cheap in US to many Aussies, Germans, and Canadians, but the same cannot be said for Americans. Gone are the days when Americans could enjoy a cheap vacation in Australia/Europe (compared to in 2000)/Canada without emptying their bank accounts.