How critical is economics to the function of finance?
How much news reading about the world economy is important for a CFA, and specifically, an Equity Research Analyst. I believe finance is different from economics in the sense that suppose Fed changes interest rates. Now, economics is to “How to change the rates based on the current economic level, ie. Basis for setting the rates”. However, the finance is to “Advise the investments on the basis of changed rates”. For that purpose, I feel that the knowledge of the economy is essential, because unless the analyst knows in advance that the rates are going to be changed, he cannot perform his duties properly. And then to be sure, he must know why the rates are getting changed, which leads to knowing the condition of the entire economy… This is just an example. The interconnection of finance & economics is everywhere and onviously inevitable. But, in my opinion, there has to be a line between the two functions. Because otherwise, an attempt to gain knowledge about everything that is interconnected consumes ginormous time. Probably, there should be an economist in the firm who educates an analyst.
Phew,
