References (30)


Citations (23)



The Making of an Investment Banker: Macroeconomic Shocks, Career Choice, and Lifetime Income

Paul Oyer

Stanford Graduate School of Business; National Bureau of Economic Research (NBER)

July 2006

AFA 2007 Chicago Meetings Paper

New graduates of elite MBA programs flock to Wall Street during bull markets and start their careers elsewhere when the stock market is weak. Given the transferability of MBA skills, it seems likely that any effect of stock returns on MBA placement would be short-lived. In this paper, I use a survey of Stanford MBAs from the classes of 1960 through 1997 to analyze the relationship between the state of financial market at graduation, initial job placement, and long-term labor market outcomes. Using stock market conditions at graduation as an instrument for first job, I show that there is a strong causal effect of initial placement in investment banking on the likelihood of working on Wall Street anywhere from three to twenty years later. I then measure the investment banking compensation premium relative to other jobs and estimate the additional income generated by an MBA cohort where a higher fraction starts in higher-paid jobs relative to a cohort that starts in lower-paid areas. The results lead to several conclusions. First, random factors play an important role in determining the industries and incomes of members of this high-skill group. Second, there is a deep pool of potential investment bankers in any given Stanford MBA class. During the time these people are in school, factors beyond their control sort them into or out of banking upon graduation. Finally, industry-specific or task-specific human capital appears to be important for young investment bankers.

Number of Pages in PDF File: 35

Keywords: investment banking, macroeconomic shocks, career choice

JEL Classification: G24, J31, M5

Open PDF in Browser Download This Paper

Date posted: March 6, 2006  

Suggested Citation

Oyer, Paul, The Making of an Investment Banker: Macroeconomic Shocks, Career Choice, and Lifetime Income (July 2006). AFA 2007 Chicago Meetings Paper. Available at SSRN: https://ssrn.com/abstract=888549 or http://dx.doi.org/10.2139/ssrn.888549

Contact Information

Paul Oyer (Contact Author)
Stanford Graduate School of Business ( email )
655 Knight Way
Stanford, CA 94305-5015
United States
650-736-1047 (Phone)
650-725-0468 (Fax)

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Feedback to SSRN

Paper statistics
Abstract Views: 3,528
Downloads: 430
Download Rank: 46,661
References:  30
Citations:  23