Stock Market Conditions and Finance Careers

Lately I've been talking to a lot of students who have concerns about how the current job market will affect their careers. So, I decided to revisit a forthcoming article in the Journal of Finance article by Paul Oyer of Standford titled: The Making Of A Banker: Macroeconomic Shocks, Career Choice, and Lifetime Income. He studies a group of Stanford MBA graduates from the 60s. Here's the abstract:

I show that stock market shocks have important and lasting effects on the careers of MBAs. Stock market conditions while MBA students are in school have a large effect on whether they go directly to Wall Street upon graduation. Further, starting on Wall Street immediately upon graduation causes a person to be more likely to work there later and to earn, on average, substantially more money. The empirical results suggest that investment bankers are largely "made" by circumstance rather than "born" to work on Wall Street.

In the introduction he says:

I estimate that a person who graduates in a bull market and goes to work in investment banking after graduation earns an additional $1.5 million to $5 million relative to what the same person would have earned if he or she had graduated during a bear market and had started his or her career in some other in dusty.

It's an interesting example of how circumstances often make people's careers. It also illustrates the huge differences in career earnings across industries.

You can read a working paper version of the article here.