What Is Finance as a Research Field?

Finance is the study of how individuals, firms, governments and institutions allocate money across time and under uncertainty. It asks how capital is raised and invested, how risk is measured and priced, how financial markets and intermediaries work, and how people actually behave when they make financial decisions. The word names both a body of professional practice (managing corporate treasuries, investment portfolios, banks, insurers and pension funds) and an academic research field, usually called financial economics, in which scholars develop and test theories about those activities. This guide explains the research field: what it covers, its main subfields, the methods researchers use, the scholarly society and journals that anchor it, and where it touches research administration through endowments, funding flows and cost recovery.

This page is educational. It is not investment, financial, legal or tax advice, and nothing here recommends buying, selling or holding any security or product. For decisions about your own money or your institution’s funds, consult a qualified professional.

What Is Finance?

Three ideas recur throughout the field. The first is the time value of money: a payment received today is generally worth more than the same payment received later, so comparing amounts at different dates requires discounting. The second is risk and return: investors who bear more risk generally require higher expected compensation, and much of the field is about defining, measuring and pricing risk. The third is information and incentives: prices, contracts and institutions are shaped by who knows what, and by whose interests are aligned or in conflict.

Finance is related to, but distinct from, its neighbours. Economics supplies much of its theory; accounting produces much of the data on firms; statistics and econometrics supply the empirical toolkit; and actuarial science overlaps where long-term financial risk is modelled. Academic finance usually lives in business schools, and in some universities in economics departments.

Finance as a Profession and as a Research Field

Practitioners work in corporate finance departments, banks, asset managers, insurers, pension funds, regulators and central banks, and in the finance offices of universities, hospitals and nonprofits. Their work is operational: raising funds, valuing projects, managing risk, allocating portfolios, and complying with rules.

Researchers work on a different question: not “what should this firm do?” but “what do firms and markets generally do, and why?” A finance scholar might study why stock prices react the way they do to news, how financing choices relate to firm value, or how regulation changes the behaviour of banks. Findings feed back into practice, regulation and teaching, which gives the field a strong applied orientation. Academic finance is typically entered through a doctoral programme that combines economic theory, econometrics and a specialization; practitioner credentials, such as professional designations, are separate from a research career.

The Main Research Subfields

Corporate finance

Corporate finance studies how firms make financing and investment decisions. Typical topics include capital structure (the mix of debt and equity), dividend and share-repurchase policy, investment decisions, mergers and acquisitions, corporate governance, executive compensation and the relationship between ownership and control. A recurring theme is the conflict of interest between managers and outside investors, and between shareholders and creditors. Corporate finance is closely linked to management and business research and to accounting research on financial reporting.

Asset pricing

Asset pricing asks why different assets have different expected returns. It develops models in which risk, preferences and information determine prices, and tests them against data on stocks, bonds, currencies, commodities and derivatives. Related topics include portfolio choice, the pricing of options and other derivatives, return predictability, and the question of how efficiently markets incorporate information. It is the most mathematically intensive of the subfields and draws heavily on stochastic processes and statistics.

Financial markets and institutions

This area studies the structure and functioning of the system that moves funds between savers and borrowers: banks and other intermediaries, securities exchanges, trading venues, clearing and payment systems, and the regulation that surrounds them. Market microstructure examines how trading rules affect prices and liquidity. Research on financial stability, bank runs and crises sits here and overlaps with macroeconomics and public administration and policy. Financial technology, including digital payments and algorithmic trading, is an expanding strand.

Behavioral finance

Behavioral finance asks what happens when investors and managers do not behave as the simplest rational models assume. It studies systematic biases in judgment, limits to arbitrage, sentiment and the way framing and attention affect financial choices. It is the finance counterpart of behavioral economics and uses both field data and laboratory or survey experiments.

Financial econometrics

Financial econometrics develops and applies statistical methods suited to financial data, which often show features such as time-varying volatility, heavy-tailed returns and strong dependence over time. Topics include forecasting, volatility modelling, high-frequency data and the estimation of asset-pricing models. It is a methodological subfield that serves the others and is closely tied to econometrics generally.

Other active areas

Further strands include household finance (how families save, borrow and invest), real estate finance, international finance, entrepreneurial finance and venture capital, sustainable and climate finance, and the use of machine learning on financial data. Some of these connect to data science.

Research Methods in Finance

Finance is a largely empirical social science, and the choice of method follows the question.

• Event studies. An event study measures how a security’s price behaves around a specific event, such as an earnings announcement, a merger or a regulatory change. The researcher estimates what returns would normally have been and attributes the difference, the abnormal return, to the event. The design is common in both finance and accounting.
• Panel regressions. Many questions involve many firms or countries observed over several periods. Panel (longitudinal) regression uses that structure to control for unobserved differences between units, and researchers pay close attention to how standard errors are computed when observations are correlated across firms or over time. See econometrics and statistics for the underlying tools.
• Causal-inference designs. Because financial data are observational, researchers use approaches such as natural experiments, difference-in-differences comparisons, regression discontinuity and instrumental variables to separate causation from correlation.
• Time-series methods. Models for volatility, forecasting and the dynamics of returns and interest rates.
• Simulation and numerical methods. When a model has no closed-form solution, as with many derivative-pricing and risk-management problems, researchers use Monte Carlo simulation and other numerical techniques. Simulation is also used to test whether a statistical method behaves well on data with known properties.
• Theoretical modelling. Mathematical models of optimizing agents, contracts and equilibrium that generate testable predictions.
• Experiments and surveys. Laboratory and field experiments and surveys of managers or households, especially in behavioral and household finance.
• Textual and machine-learning analysis. Natural-language processing of filings, news and earnings calls, and machine-learning methods for prediction.

Two practical concerns shape the field. Much finance data comes from commercial databases and regulatory filings, so access, licensing and documentation matter for reproducibility. And because the same datasets are analysed by many researchers, the field has a long-running discussion about multiple testing and about whether published findings hold up on new data. CASRAI’s coverage of research methods and of data management and reproducibility applies here as elsewhere.

The American Finance Association and Journals

The American Finance Association (AFA) describes itself on its website as “the premier academic organization devoted to the study and promotion of knowledge about financial economics.” According to the AFA, it was established in December 1939 in Philadelphia. Its first journal, American Finance, launched in 1942 and later became The Journal of Finance, with regular publication beginning in August 1946. The AFA says it aims to provide mutual association for finance professionals, improve public understanding of financial matters, exchange ideas through publications and encourage finance education in academic institutions. It holds an annual meeting each January, at which the sitting president delivers the Presidential Address.

The AFA publishes two journals: The Journal of Finance and Journal of Finance: Insights and Perspectives, which the AFA describes as launching in 2026 with an inaugural issue in October 2026. Because the newer journal is so recent, check the AFA site for its current scope and status. Other widely read finance journals are published by independent publishers and societies, and many finance scholars also publish in economics and accounting journals when a question crosses fields. Journal rankings differ by school and country, and no single list is authoritative, so check which list your institution uses. For general publishing mechanics, including preprints, see CASRAI’s publishing hub; finance researchers commonly circulate working papers before publication, and one of the platforms involved is covered in arXiv vs. SSRN.

Other societies serve particular strands, and practitioner and certification bodies are separate from the research societies. Membership figures and programmes change, so confirm current details directly with each organization.

Funding for Finance Research

Most academic finance research is supported through business-school and department budgets, internal research funds, summer research support and access to commercial data subscriptions, rather than large external grants. External money can come from foundations, central banks and regulators, industry and professional associations, and government research agencies. In the United States, the National Science Foundation supports social, behavioral and economic sciences broadly, and economics-related work can fall within its programmes; this guide did not verify the current programme names or solicitations, so confirm current opportunities and eligibility directly with the funder. Where industry, a regulator or a data vendor funds or supplies data for a study, disclosing that support and managing any conflict of interest is part of responsible practice. See also private foundation funders for institutional research.

Where Finance Meets Research Administration

Finance is not only something research administrators read about; their institutions are financial entities. Four connections stand out.

Endowments and investment income

Many universities and research institutes hold endowments, pools of donated funds invested to support the institution over the long term. How much of an endowment can be spent each year, and for what purposes, is governed by donor terms and by institutional policy, and the investment of those funds draws on exactly the portfolio and risk concepts studied in asset pricing. See the dictionary entry on endowment income. Donor restrictions and fund accounting are accounting topics; see the accounting guide.

How research funding flows

Research money reaches institutions from governments, foundations, industry and donors through different instruments, each with its own financial rules: grants, cost-reimbursable contracts, foundation grants, and early-stage seed funding. Awards may be paid in advance or reimbursed after costs are incurred, which creates cash-flow and working-capital questions for the institution. Unspent balances may or may not be allowed to roll over; see carry-forward. The grants management hub covers the funding lifecycle.

Cost recovery

Sponsors typically pay both the direct costs of a project and a share of the institution’s shared infrastructure and administration costs. Institutions negotiate rates for that second component, and the rules differ by sponsor type. See indirect cost recovery, indirect cost rate agreements, full economic costing (the approach used in some other systems) and direct vs. indirect costs. For the two main sets of U.S. federal cost principles, see FAR Part 31 vs. 2 CFR 200.

Audit and oversight

Institutions that spend federal awards above a regulatory threshold face an audit of those awards; see Single Audit vs. regular audit and the guide to the Schedule of Expenditures of Federal Awards.

Frequently Asked Questions

What is the difference between finance and financial economics?

The terms overlap heavily. “Finance” is the broader label that includes professional practice; “financial economics” usually names the academic research field that applies economic theory and empirical methods to financial decisions and markets. The American Finance Association uses the latter phrase to describe its subject.

What is the difference between finance and accounting?

Accounting measures and reports an organization’s economic activity; finance uses that information, and market data, to study and make decisions about funding, investment and risk. Research in the two fields overlaps and shares methods such as event studies.

What is the difference between finance and economics?

Finance is generally treated as an applied branch of economics focused on financial decisions and markets, with its own institutions, data and journals. See the economics guide.

What does corporate finance research study?

How firms choose how to fund themselves and where to invest, and how governance, ownership and incentives affect those choices.

What does asset pricing research study?

Why assets earn the returns they do, how risk and investor preferences determine prices, and how well markets reflect available information.

What is behavioral finance?

The study of how psychological factors and limits to arbitrage affect financial decisions and market prices, as an alternative or complement to models that assume fully rational investors.

What is an event study?

A research design that measures how asset prices behave around a specific event, comparing actual returns with what would normally have been expected.

How do you become a finance researcher?

Most academic finance researchers hold a doctorate in finance or economics, with training in economic theory and econometrics. Requirements vary by school and country.

Does this guide give investment advice?

No. It describes an academic field. Nothing here is a recommendation about any investment, and past research findings do not guarantee future results.

Related CASRAI Resources

This guide is part of CASRAI’s Branches of Science series. Closely related discipline guides include economics, econometrics, accounting, behavioral economics, management and business research, actuarial science, operations research and statistics.