Business, Economics, and Management
The business, economics, and management (BEM) option is one of just a few undergraduate business programs of its kind in the nation. The BEM curriculum exposes students to core ideas and concepts from many fields—including finance, economics, political science, and psychology—while providing them with the analytic tools needed to excel in graduate programs and the modern business environment, including the financial industry, consulting, and entrepreneurial ventures. Today's business environment is complex, and therefore required courses in this option are highly analytic. Students often pair the BEM option with a science or engineering option. Established in 2011, the Ronald and Maxine Linde Institute of Economic and Management Sciences is a hub for interdisciplinary research in the social sciences with concentrations in economics, finances, and management.
Caltech has taken a unique approach to the study of business. Differing from a traditional business school model that is based primarily on inductively studying cases, Caltech's BEM program is rigorous, quantitative, and highly interdisciplinary. It provides students with analytical and conceptual tools to succeed in a modern, volatile business environment. To our knowledge, Caltech is the only institution to apply this social-scientific approach to undergraduate business education.
BEM Coursework at a Glance
BEM 117. Behavioral Finance. Much of modern financial economics works with models in which agents are fully rational, in that they maximize expected utility and use Bayes' law to update their beliefs. Behavioral finance is a large and active field that develops and studies models in which some agents are less than fully rational. Such models have two building blocks: limits to arbitrage, which makes it difficult for rational traders to undo the dislocations caused by less rational traders; and psychology, which provides guidance for the kinds of deviations from full rationality we might expect to see. We discuss these two topics and consider a number of applications: asset pricing; individual trading behavior; the origin of bubbles; and financial crises.