Wharton - ugly stats for 2007 internships

Wow, if IB internships decreased that much at WHARTON I wonder how bad it was at lower ranked finance (and non-finance) schools (NYU, Chicago, Columbia).

When you see the numbers in the main banks, you will be surprised how this just simply isn't a "dominance" thing that branding and positioning with prospectives suggests. That is by the by though, and a whole other world of complication.

As for the first question and thread topic - virtually every single bank took classes half the size they had the year previous, in IB and S&T. The bank that didn't recruited as low as 30% of the summers, whereas elsewhere it was around 50-60% (these figures are a mix of S&T and IB from what I have heard). If there isn't a turn around in the next two months, it is likely it will look similar in class size for class of 2010.

Investment Bank people are meant to like competition, so it is a good thing, right?!

I am curious how students will take this. The biggest part of going to a top MBA program is to get your dream job or at least a great job with a great company. If people come up completely empty they are going to be a little upset about spending 100k+ and missing two years pay. It will be interesting to see how this affects rankings and what not since employment stats and students opinions are big factors in most rankings. Banking schools could take a hit in the rankings.

Dunno, I can't remember talking about that subject...

That's true. I'd imagine there will be some very upset students at the banking schools. Something interesting that I noticed about the "banking schools" when I was researching Chicago GSB is that everyone thinks these schools are filled with bankers (analysts) that want to become bankers (associates). But I noticed that at Chicago GSB only 31% of students came from a finance background while 55% went into finance after graduation. So, while I'm sure 31% is a little bit high relative to other schools a banking school is really defined by the exit careers of the students, not the entering careers. Using the numbers above for Chicago, roughly a quarter of the school watned to make a career change into finance (from some other career). In today's market that is going to be nearly impossible. I know people that graduated during the last recession and they said it was hard enough to switch functions within your industry - such as corporate finance to IB - let alone transition to a brand new industry. I would imagine up to a quarter of the class at finance schools such as Chicago could be pretty unhappy.

Would any of you interpret that schools like Wharton may admit more than before students who wish to return to industry careers? I would make that interpretations as certain sectors of the economy are doing quite well and schools like Wharton may not want to have internship employment decreases. I anticipate the banking jobs trend to remain low for the next 2 years or so.

There is a recent article by Stanford professor Paul Oyer titled "The Making of an Investment Banker: Macroeconomic Shocks, Career Choice, and Lifetime Income". His data shows that stock market shocks have important and lasting effects on careers of MBAs. He estimates that a person who graduates in a bull market and goes to work in investment banking upon graduation earns an additional $1.5 million to $5 million relative to what that 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 industry."
https://faculty-gsb.stanford.edu/oyer/wp/mba.pdf

Thanks, it would be interesting if all the bankers who did not score internships were able to secure gigs elsewhere. Or did students have to forego internships altogether.

Most people found something, some didn't (depends on how flexible they were to change choices and things). The bank recruitment ends by Feb. If you don't get something, you have four months to get something. Which is hardly implausible, so you should be OK (HF, PE, VC all mill around late on as their recruiting plans are more improvised and decided later).

In effect, all you miss out on is the real big fall recruitment companies if it doesn't work out.

"The results also suggest that risk averse MBA students, especially those interested in Wall Street careers, may want to take actions to insure themselves against the random wealth effects imposed by stock returns while they study. These students should short the stock market upon entering school so that their portfolios hedge their expected labor income."

Why the shock? Not sure if I understood that excerpt correctly.

If the broader market keeps tanking, you make money off of your shorts. If it recovers, Wall Street goes on a hiring spree and you'll land a 250-300k a year Associate gig anyway.

So you come out ahead irrespective of where the market goes. That's how it's supposed to work in theory.

Actually what he is saying is that a risk averse MBA student should hedge (i.e., make the outcome neutral regardless of what happens to the stock market) his/her MBA post-grad job by shorting the S&P upon entering b-school.

Translation:
1) You are long finance human capital
Performance of this position:
a) Stock market goes up ---> Get an IB position
b) Stock market goes down ---> Don't get an IB position

2)Short S&P
Performance of this position:
a) Stock market goes up ---> Lose money on your short position
b) Stock market goes down ---> Gain money on your short position

The final outcome is that you have a net neutral position. I understand the mechanics of the theory. I'm having a hard time wrapping my arms around it and buying into it, though (hence the shocked expression)...

That isn't what he is saying - it is a partial hedge in that respect. The idea is that you get the IB job come-what-may. It pays less if you go into a bear market rather than bull (promotion, bonus).

I think it is just a desperate scrape around to make an interesting, quoted article. In reality, I expect going in at the tail of a bear is better than having gone in 2006, which was clearly bull... yet now a large volume are unemployed.

I certainly hope so for us Fall 2009 entrants! The economy maybe in recovery, but it could also be a prolonged / more defined recession. It seems like media is all too quick to say an economic slow down is a recession and far too slow to say positive economic signs mean a turn to better days. Those talking heads on MSNBC are a bunch of pessimits!

Hopefully the NBER will come out and say a recession started already, since the recession usually ends about the time they tell you it starts. It's almost uncanny how accurate it is.

November 26, 2001 - Announced Recession started in March, 2 years later the Announcement was made the recession ended that November

April 25, 1991 - Announced Recession started in July 1990, later the Announcement was made the recession ended in March 1991

So as soon as the NBER comes out, I will feel much better about the internship prospects for summer 2010.

I never knew this, but that is just silly.