DEFINITION of Harvard MBA Indicator
The Harvard MBA Indicator is a long-term stock market indicator that evaluates the percentage of Harvard Business School graduates that accept "market sensitive" jobs. Market sensitive jobs exist in fields such as investment banking, securities sales and trading, private equity, venture capital, and leveraged buyouts. If more than 30% of a year's graduating class take jobs in these areas, the Harvard MBA Indicator creates a sell signal for stocks. Conversely, if less than 10% of graduates take jobs in this sector, it represents a long-term buy signal for stocks.
BREAKING DOWN Harvard MBA Indicator
Started and maintained by consultant and Harvard Business School graduate Roy Soifer, the Harvard Indicator gave sell signals in 1987 and in 2000, which were both terrible years for the stock market. The esoteric indicator is meant to represent long-term signals based on the relative attractiveness of Wall Street jobs. The more grads that are enticed to go there, the more bloated Wall Street becomes and the more likely the market is nearing a top. When stock markets are doing poorly, fewer grads want to enter the sector.
This indicator runs on a similar theme to the old market adage that when everyone else is looking to get in, it's time to get out.