The Harvard Indicator

Wednesday, October 31st, 2007

Investors are always looking for new, useful indicators to predict market performance. Behold The Harvard Indicator:

Many different indicators have been used in an effort to project future stock market directions — everything from interest rates to transportation volumes to the length of women’s skirts. Here’s a new one. Roy Soifer suggests that the collective career decisions of Harvard MBA graduates are a contrarian market indicator…that when the graduates are heading for Wall Street in droves, then the market is likely headed for a fall — whereas, when they are choosing jobs that aren’t stock-market-oriented, then the future of the market will be bright. Specifically, Soifer (who is himself a Harvard MBA) says his data implies that: when the percentage of Harvard MBA grads going into market-related jobs is under 10%, it’s a signal that stocks are a long-term buy…and when the number is over 30%, it’s a sign that the markets are overvalued and due for a fall. (The most recent number is 26 percent, at the very high end of “neutral” territory.)

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