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the Life of an Equity Research Analyst
Responsibilities of an Equity Research Analyst
Working as an equity research analyst requires multiple talents and skills and can make for a rewarding career. These professionals research public companies and come up with recommendations for investors about whether to buy, sell, or continue holding certain stock. Analysts are usually assigned a particular group of companies, in a specific industry, for which they are responsible.
Brokerage firms (known as the sell-side, since they provide the research to their customers interested in making investments) employ equity research analysts. Mutual funds, hedge funds, and others that manage their clients’ money and invest on their behalf, known as the buy-side, also employ equity research analysts, who make investment recommendations to their portfolio managers. But what do these analysts actually do on an everyday basis?
- Equity research analysts research public companies and come up with recommendations for investors about whether to buy, sell, or continue holding certain stock.
- Both brokerage firms on the sell-side as well as funds on the buy-side both employ equity research analysts.
- On a daily basis, an equity analyst keeps a pulse on the stock market and company-specific news that could affect returns, updates colleagues on these changes, and issues reports.
Catch up and Keep up With the News
Typically, equity research analysts start their day pretty early, before the nine-to-five grind begins, and keep abreast of what’s going on with the companies they cover. They do this by keeping up with wire services and other news sources, and also tracking global economic and market developments and trends. Throughout the day, analysts stay on top of any breaking news that impacts the stock markets and the companies they cover, getting input from both industry-specific and general news sources. On particularly volatile market days, this can make for quite a roller-coaster ride.
Another aspect of the equity research analyst’s job is to inform and update colleagues on the sales side with recommendations and insight on various stocks (buy, sell, or hold ratings) so that brokers can better explain those choices to clients. This requires critical and creative thinking, strong communication skills, and the ability to quickly and accurately synthesize data from a number of different sources and present that information in an accessible way. Analysts need to anticipate and be prepared to answer questions their sales-side colleagues may have about certain stocks, and they might also need to update senior analysts about actions taken on various stocks.
Throughout the day, analysts may have to meet with colleagues, such as their supervisors, to touch base and exchange notes and ideas.
Issue Reports and Keep Track of Companies Covered
Analysts come up with forecasts and earnings estimates for the companies they cover. During earnings season, as companies release their quarterly figures, analysts come out with their take on how the company has performed and might also update and tweak their earnings models for particular companies. In addition to following general news and economic events, analysts track any specific developments that could affect the value of the stock of any company in their particular group.
For instance, if a company announces a new product that could impact its earnings, analysts assess this news and include their findings in the reports they produce. Analysts might need to update these reports on a daily basis.
Keep in Touch With Company Management
Frequently, equity research analysts meet with the management of the companies they cover so as to get the most timely information in order to update their earnings estimates and reports. They could get such updates in person or on conference calls. While management provides such input to equity research analysts, executives have to be careful not to share any information with analysts that might impact the company’s stock price and that isn’t available to the public. That would give an unfair advantage to the analysts.
The Securities and Exchange Commission (SEC) has issued rules relating to such fair disclosure practices, meaning analysts have to tread carefully with management. Some companies tend not to cooperate with analysts they feel haven’t treated them fairly in reports. Analysts need to provide investors with an accurate picture of a company’s potential, but they also don’t want to alienate a company’s management and risk losing access to important information.
In the wake of misleading research issued during the dot-com boom, the SEC enforced regulatory action meant to curtail the practices of investment banks that used research reports more as an avenue to generate investment banking business than as a means to provide accurate and objective information for investors. This led investment banks to scale back on their equity research needs. However, while sell-side roles at large investment banks have declined, there are still opportunities for equity research analysts, particularly with smaller research firms and boutiques.
The Bottom Line
Analysts typically spend more time than average at their work but don’t need to put in the grueling hours associated with investment banking. In general, analysts keep up with news, update their colleagues, catch up with the companies they cover, issue and update company reports, and attend meetings in their day-to-day work. While the job of an equity research analyst has lost some allure in recent years, as firms have cut back on the number of analysts they employ, it remains a competitive field.
Extra Information About what does an equity analyst do That You May Find Interested
If the information we provide above is not enough, you may find more below here.
A Day in the Life of an Equity Research Analyst – Investopedia
Equity Analyst Job Description – Betterteam
Data on Equity Analyst Jobs and Salary Expectations
What does an Equity Analyst do? (with picture) – Wise Geek
What Does An Equity Research Analyst Do – Zippia
What is An Equity Analyst? | Career Path and Overview – Zippia
Equity Research Analyst (Types, Roles & Responsiblities)
Frequently Asked Questions About what does an equity analyst do
If you have questions that need to be answered about the topic what does an equity analyst do, then this section may help you solve it.
What kind of education is required to be an equity analyst?
A background in statistics and mathematics is advantageous for equity research analysts, who typically hold a bachelor’s degree in finance, accounting, economics, or business administration. Senior equity research analysts frequently hold a master’s degree.
How much money do the best equity analysts make?
Salary for equity analysts
|Annual Salary||Hourly Wage|
How are equity analysts paid?
You see, research is one (very important, I might add) part of a three-part team that also includes sales and trading. Sell side equity research makes money indirectly, primarily through b>commissions generated when the buy side trades through the sell side trading desks/b>.
What qualifications are necessary for equity research?
Skills Necessary for Equity Research
- Excel Skills.
- Financial Modeling.
- Accounting Skills.
- Writing Skills.
Do equity analysts put in a lot of time?
Analysts can work up to 100 hours per week doing equity research.
How long are equity analysts at their jobs?
You might put in an average of 55 to 60 hours per week, with peaks of 70 to 80 hours during the peak of the pay period.
What kind of analyst is compensated the highest?
Analysts and consultants in the hardware and networking industries typically make more money than, say, market research analysts (a more prevalent position).
What characterizes a good equity analyst?
Employers want to know you have proven abilities that can be demonstrated with your SAT or GMAT test scores and industry background. Successful Equity Analysts have lengthy and comprehensive industry experience and have acquired extensive financial modeling skills.
Does equity research require a CFA?
While it’s typically preferred, but not required, to have a degree in business, finance, or investment, you can still qualify for the position of an equity research analyst by earning certifications like the Chartered Financial Analyst (CFA) designation.
Where are CFA needed most?
The demand for CFA charterholders is high in traditional investment advisors like mutual funds as well as alternative investments like hedge funds, underwriting, fixed income, and private equity.
Is equity research well compensated?
Equity Research Salary and Compensation Post-MBA and graduate-level hires earn in the middle to high-end of that range, and possibly slightly above it, with total compensation typically falling between $25,000 and $100,000 USD in major financial centers.
Does CFA pay off in equity research?
To CFA or not to CFA: That is the question. If you want to work in portfolio management, then definitely pursue the certification. However, at the entry-level of equity research, the CFA is not a good use of time. However, many people in more advanced ER positions have the certification.
Which is better: CFA or MBA?
While an MBA focuses on general management skills like marketing, operations, finance, human resource accounting, etc., a CFA focuses on improving investment management skills, including investment analysis, portfolio strategy, asset allocation, and corporate finance.
The best degree for a CFA is…
There is no restriction on major, but it is much better if you majored in related fields like finance, business, and accounting because the exam itself is quite difficult. CFA candidates should have a bachelor’s degree from an accredited educational institution.