What is the Harvard MBA Indicator?
A contrarian long-term stock market indicator, the Harvard MBA Indicator, measures the percentage of Harvard Business School MBA graduates who accept “market-sensitive” positions. Job opportunities in market-sensitive areas include investment banking, securities sales and trading, private equity, venture capital, and leveraged buyouts.
The Harvard MBA Indicator signals stock sales if more than 30% of a graduating class works in these fields. Equities are a long-term purchase if less than 10% of graduates work in this sector. The midpoint is “neutral.”
Understanding Harvard MBA Indicator
Established and managed by Roy Soifer, a 1965 Harvard Business School MBA graduate and investment consultant, since 2001, The Harvard MBA Indicator issued sell warnings in 1987 and 2000, both dismal stock market years. The esoteric indicator represents long-term Wall Street job attractiveness signals. Wall Street grows bloated as more graduates arrive, and the market may crest. The stock market declines to discourage graduates from entering business.
This contrarian indicator follows the market adage, “When everyone else is looking to get in, it’s time to get out.” Thus, herding can indicate a reversal.
Harvard Master of Business Administration Indicator performance
Soifer claims the Harvard MBA Indicator generates more sale indications than purchase ones. The last time it achieved a 10% long-term “buy” was in 1982, launching a spectacular bull market. Soifer says, “In 1937, just three MBAs—1%—entered Wall Street, a record low. The moment was right to buy.” The record high of 41% was in 2008, before the stock market fell during the 2008–09 financial crisis and Great Recession.
This measure is “rather esoteric but nonetheless generally accurate” for long-term stock market direction, according to Soifer.
Conclusion
- The Harvard MBA Indicator tracks the percentage of new Harvard Master of Business Administrations who work in securities markets to predict long-term market movements.
- This contrarian indicator signals a sell signal if more than 30% take such employment and a buy signal if fewer than 10% do.
- The Harvard MBA Indicator, which generates more sell than buy signals, successfully anticipated stock bear markets in 1987, 2000, and 2008.
