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THE JOURNAL OF FINANCE VOL. LXIII, NO. 6 DECEMBER 2008 The Making of an Investment Banker: Stock Market Shocks, Career Choice, and Lifetime Income PAUL OYER 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. Back in January 1987 ... Wall Street was booming When the job offers rolled in, students played one house against another. They were the supply, and the demand was strong After the crash, the receptions that had once played to packed houses were drawing a few dozen students. Out went the tenderloin on toast and the shrimp; in came the dips and the hot dogs on toothpicks. The school placement office sent out a memo suggesting career ‘flexibility’ for finance majors like me; we should look into opportunities in manufacturing and consulting. (Brown (1988)) I NVESTMENT BANKERS ARE CRITICAL FIGURES in financial markets. They are involved in virtually all large financial transactions, including mergers and acquisi- tions, initial public offerings, and other securities offerings. The business press, discussions in classrooms and hallways at leading business schools, and even movies and novels suggest that investment bankers are well compensated for their efforts. But how do these people who have such an important influence on financial markets get into their positions? Are some people endowed with great financial acumen, honing these skills in college and MBA programs on their inevitable progression to a career on Wall Street? Or are there many Paul Oyer is at the Graduate School of Business, Stanford University. I thank Ken Corts, Vicente Cunat, Liran Einav, Eric Forister, Campbell Harvey, Dan Kessler, David Robinson, Kathryn Shaw, Andy Skrzypacz, Ilya Strebulaev, Till von Wachter, Jeff Zwiebel, anonymous referees, and seminar participants at Berkeley, Chicago, Dartmouth, Middlebury, IZA/SOLE, Gerzensee, and the AFA meetings for comments. I thank Ed Lazear for both sharing the MBA survey data and providing useful suggestions. I am also grateful to Stanford’s Vic Menen and Andy Chan and to Wharton’s Christopher Morris and Jennifer Sheffler for providing historical placement information for their schools and to Kenneth Wong for research assistance. 2601
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2602 The Journal of Finance skilled people whose abilities would be valuable in almost any type of work and who end up on Wall Street due to unpredictable events? Using a data set of graduates from Stanford University’s Graduate School of Business, I address the issue of whether investment bankers are “born” or “made.” I document the
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This note was uploaded on 04/29/2010 for the course ECON 345 taught by Professor Sumaila during the Fall '09 term at The University of British Columbia.

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