HBS Graduates Avoid Finance

Fewer Harvard Business School students are entering careers in finance, a sign that global stock markets may be leveling off, according to the latest report of an HBS alumnus who correlates MBA career choices with long-term market performance.

The annual Harvard MBA Indicator, compiled by financial consultant and HBS graduate Ray Soifer, advises investors to sell when 30 percent or more of the Business School class enters finance and encourages investors to buy if 10 percent or fewer enter the sector.

This year, 28 percent of the Business School’s graduating class entered “market-sensitive” sectors, which include investment banking, hedge funds, and private equity, among others. That is down from a record high of 41 percent in 2008, according to Soifer’s report.

“It is a positive signal, but it’s not a ‘buy’ signal,” Soifer said, adding that the last time there was an unambiguous “buy” indicator was in 1983.

As more and more HBS students have been attracted to finance, the study has largely reported sell signals over the past decade. They were seen in 2000-2002 and 2005-2008. The years 2003 and 2004 were neutral.

Though she was unsure about the model’s value for investors, Managing Director of MBA Career and Professional Development Jana P. Kierstead said there seemed to be some correlation in recent years.

“In many respects, a correction like the one we’re experiencing allows students to focus and make different decisions,” Kierstead said.

On-campus recruiting by finance companies was noticeably down this year, and firms in the sector have made fewer offers to students they employed over the summer, according to Kierstead.

Patrick S. Chun ’04, co-president of the HBS Student Association, said that he sees students who might be interested in finance exploring careers in social enterprise, entrepreneurship, and government.

“Of course, with the taxpayers owning the largest banks, it’s hard to tell the difference between jobs in government and jobs in finance,” Chun quipped.

Soifer first considered the idea of a market indicator based on HBS during his days as a student there in the 1960s. He has monitored it ever since.

According to Soifer’s research, the indicator reached its all-time low in 1937, when only 1 percent of graduates went to work on Wall Street.

“If you had bought stocks in the fall of 1937, you’d have done pretty well since,” Soifer’s report said.

—Staff writer William N. White can be reached at wwhite@fas.harvard.edu.