Bendheim Center will celebrate 10th anniversary

In its first 10 years, it became what The Wall Street Journal calls “Bernanke’s Bubble Laboratory,” producing some of the best research on the formation of economic bubbles.

The center, which offers undergraduates, masters students and Ph.D. candidates an interdisciplinary approach to finance, has graduated nearly 1,300 undergraduates and 161 masters of finance students since beginning in 1999 and 2001, respectively.

Unlike at many business schools, where professors teach only finance, professors at the Bendheim Center are all affiliated with other academic departments, such as history or psychology.

“Princeton does not have a business school, nor does it have the intention of ever having a business school,” said professer Yacine Ait-Sahalia, director of the Bendheim Center. As such, he explained, the program allows students to study the field from a perspective that stretches far beyond business.

Ait-Sahalia argued that finance has relevance beyond Wall Street, explaining that “finance has become increasingly important as a research field simply because so many of the decisions we are making have a financial component these days,” including most public policy decisions.

Professor Wei Xiong, who has taught at the center for 10 years, said that the certificate offered by the center acts as a sort of insurance for some undergraduate students who are interested in other academic fields but want to be prepared for financial jobs.

He added that the center is less constrained than business school programs. “Our own research is to intellectually understand principles of markets and key economic forces that drive them,” he said.

Xiong explained that in his own classes on derivatives, “it’s not about applying formulas to find price, but the mechanisms behind the current models and why it works and why it doesn’t work.”

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Aaron Gonzales ’00, for example, a member of the first class of certificate graduates, said his studies at Bendheim aided his non-banking career.

Gonzales decided to enter the finance program because he planned to work in the financial sector. But after an investment banking internship before his senior year, he reconsidered his earlier goal of attending law school.

After studying law at University of Virginia, Gonzales is now a compliance officer for an investments company. “While my classes [at Princeton] aren’t integral to my day-to-day job,” he said, “knowledge of finance gives more credibility to the answers I give people I work with.”

Over the last decade, economic tumult has challenged the field of finance. The center has sought to adjust its course offerings and research accordingly. Professor Markus Brunnermeier, for example, has done research over recent years on the formation and subsequent crash of the housing bubble.

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The Bendheim Center has been credited by The Wall Street Journal as being at the forefront of research in economic bubbles and other financial phenomenon.

But Duygu Gozeler GS ’07 said the center’s constant focus on “the theory of how things work” meant that much of what she had learned remained unchanged despite the changing economic environment. She added that the center’s small size facilitated communication with faculty.

“The professors, who are big names in the financial industry, are more accessible,” than they would be in big business schools, she said.

Unlike business schools, which often host classes of more than 200 students, the center’s masters in finance program averages 23 students per year.

Smaller classes also have drawbacks, Gozeler noted, such as fewer opportunities for socializing and networking with other students, compared with traditional business schools.

The Bendheim Center remains one of the few interdisciplinary finance program in the United States, Ait-Sahalia said. While many other institutions have considered starting similar centers, few have done so, often due to overlap with existing business schools on their campuses.

The program also emphasizes its broad research approach. While the majority of faculty and students focus on economics and financial engineering, faculty in the center come from seven different departments. Certificate students in the Class of 2011 represent 17 majors.

Ait-Sahalia said that finance is offered as a certificate program rather than a concentration to preserve its interdisciplinary core. Xiong said that the center continues to operate with the diversity of its students’ trajectories in mind.

“I anticipate a lot of [my students] will go to Wall Street or Wall Street-like institutions, though some of them are intellectuals and some do move to policy-making,” Xiong said. “An important goal of our teaching is that students should know how to critically think about issues in a rapidly changing environment.”