Why Harvard Is Bad for Wall Street
April 28th, 2009Five year old article.
Via: Slate:
The more Harvard grads on Wall Street, the worse the market does. Soifer counts the proportion of the class that goes into the six categories of jobs that “depend to a large extent on the stock market”: investment banking, investment management, sales and trading, venture capital, private equity, or leveraged buyouts. Historically, when fewer than 10 percent of HBS grads go into these fields, it’s a signal that stocks are a long-term buy. The figure last fell below 10 percent in the early 1980s, just before the great recent bull run began. The worst year was 1937, when only 1 percent of alums went into the securities industry. For long-term investors, the late ’30s turned out to be a great time to buy stocks.
The HBS grads are an even better “sell” warning. Soifer has found that when 30 percent or more of HBS alums throng into the industry, it’s a sell signal. In 1987, more than three of every 10 HBS grads rushed to join the crowds playing Liar’s Poker—just in time for the crash. In 2000, the year of the market meltdown, 30 percent of HBS grads went to Wall Street. In 2001 and 2002, as 32 percent and 36 percent of HBS grads entered the sector, the malaise continued. HBS students finally got wise in early 2003, as only 23 percent went into the industry. Soifer presciently noted that this 2003 drop was an indicator that the market was about to have a good year, which it did.
Research Credit: ltcolonelnemo
