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.

Another Investment Banking Blog

I was recently reading Mergers & Inquisitions (one of my regular reads), and saw this a mention of the blog titled Investment Banking Resumes. It's written by Anna Maria D'Souza. Here's her profile:

I am a headhunter and have nine years of experience in recruiting senior investment bankers. I have a mission to help young people to start and build an investment banking career.

If you're considering a career in investment banking, the site looks like it'll be well worth your time. A lot of the site is very "inside baseball", with information on compensation packages of star performers. But there are also a lot of useful tips on resume writing, cover letters, etc...

It'll be added to my blogroll the next time I Update

An Excellent Resource On Investment Banking Interviews

I've been a long-time reader of Mergers and Inquisitions (at least, I've read it since its start).

The guy who writes it ("The Inquisitor") has a couple of years experience in investment banking, but left the industry a while ago to pursue other interests. He writes most often on the process of getting a job in investment banking, what the life of a low-level investment banking scut-puppy is like, and so on. He's funny, seems to know his stuff, writes well, and links to this blog, so I couldn't ask for more.

A student of mine is going today to visit an alumni at a major investment bank. The alum is an Managing Director at the firm and has taken the student under his wing. He invited the student to spend the day at the bank, and is having him squired around by a couple of mid-level folks to help the student learn more about the firm and hone his pitch for when he gets his internship interview.

As part of his preparation, I had the student read all of M&I's posts. He also bought this guide the M&I blogger put together, titled Breaking into Wall Street: 200 Investment Banking Interviews and Answers. He had me look it over and give him my impressions. So here they are:

If you're trying to get a banking job (or even a job in investment management), buy this guide before you go on your interviews. Don't ask questions - just buy it. It lists quite a few technical questions (like "what are the three financial statements, and how do they link together?", or "when do you capitalize and when do you expense outlays?") along with clear, succinct answers. But more importantly, it spends a lot of time on how to put together a consistent, compelling "story" about yourself that will sell well with an Investment Bank (or at least, how to avoid saying things that will get you eliminated).

The biggest mistake most new applicants make is that they don't take the time to put together a consistent narrative about who they are and why it fits with the firm at which they're interviewing. This guide will help them to do thexactly that.

The only addition I'd like to see is a few pages on structuring a resume - what to do and what to avoid. I realize the author provides that service for a fee, and might be considering doing that as a separate guide. But putting this in the guide would make it even better. However, even with that shortfall, this guide is worth its cost many times over.

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Another Good Investment Banking Blog

The other day, while looking for ways to avoid studying for the CFA exam, I came across another pretty good blog on Investment Banking. It's titled "The Prince of Wall Street". Here's the Prince himself describing his blog:

...Prince of Wall Street is a regularly updated finance blog featuring original finance news, gossip, trades, and commentary. The commentary predominately focuses on M&A, private equity, hedge funds, and investment banking.

Now some basic personal information about The Prince. He is a senior at a prestigious college awaiting the start of his first full-time job as an investment banking analyst at a bulge bracket bank. He did three summer analyst stints at a prestigious bulge-bracket investment bank and then signed on to work full-time in the Financial Sponsors Group. He worked in prime brokerage sales for two summers. It is fitting that The Prince would study Philosophy and Economics as an undergraduate. The Prince also spent a term at University College in Oxford (god save the queen, and The Prince).

This blog was started when The Prince realized he spent way too much time reading finance blogs and newspapers. He hopes to also share some of the humor that goes along with working in banking and give some perspective to prospective investment bankers on what life is really like as an analyst. Even if his readers decide his commentary and analysis is wrong, he hopes they at least find it thought-provoking. That is all my loyal subjects.

He's got a nice touch - he writes mostly in the third-person, has a good sense of humor, and uses a lot of references to Machiavelli (hence the title). My limited reading gives me a sense that while the blog covers a pretty good range of IB-related topics, it would be particularly interesting to students (both grad and undergrad) hoping to break into the IB field. So, I'll be adding it to my blogroll.

Check out the blog here.

Enough bloggery - back to CFA review.

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Some Quick Tips For Summer Internships (Investment Banking and Otherwise)

Mergers and Inquisitions is rapidly becoming one of my favorite blogs - it's got a lot of good advice for those trying to get into the Investment Banking field. In his latest piece, the Inquisitor (nice name, BTW) puts up some helpful tips for those on a summer IB Internship. With minor modification, much of the advice holds up pretty well for almost any internship, no matter what field. Here's my take on the "important" stuff, with a few more thrown in to boot:

• Don't expect to work on a high-profile things. There's big money involved and high stakes, so they're not going to put it in your hands. So don't ask to do an LBO model right away. Expect to do a lot of grunt work - in any event, if you get a job offer, you'll be doing a lot of this anyway.
  
• Don't screw up. Ask questions if you're not sure. But don't ask the higher-ups. That's what (1) your peers, and (2) your "Analyst Master" are for. Never go higher up the food chain (like a Managing Director). Just. Don't.
• On a related note, Always check your work - multiple times. Get a reputation for doing sloppy work and you won't get an offer.
  
• Don't bad-mouth the competition. Word gets around, and there's a lot of shop-hopping. The person you bad-mouth the competition to this month might end up there next month.
  
• Even if you are working long hours (and you will be), stay cheerful and upbeat. Even if they know it's fake, it still scores points.
• Don't try to suck up to anyone above your analyst.
  
• When in doubt, keep your mouth shut, and don't brag. Chances are, the company folks around you will know far more than you. If they do, you'll get exposed as a poser or a jerk. If they don't, they won't appreciate your "superior" knowledge. So keep your yap shut - you almost never get in trouble for keeping quiet.
  

Read the whole thing here.