Research Analysts
A research analyst is a professional who prepares investigative reports on securities or assets for in-house or client use. Other names for this function include securities analyst, investment analyst, equity analyst, rating analyst, or simply "analyst."The work conducted by the research analyst is in an effort to inquire, examine, find or revise facts, principles, and theories for internal use by a financial institution or an external financial client. The report an analyst prepares entails the examination of public records of securities of companies or industries, and often concludes with a "buy," "sell" or "hold" recommendation.If the research analyst is involved with an investment bank or a securities firm controlled by a member organization of the Financial Industry Regulatory Authority (FINRA), they may be required to register with a self-regulatory organization (SRO) and/or take certain exams.
Definition: A research analyst is a professional who prepares investigative reports on securities or assets for internal or client use. Other names for this role include securities analyst, investment analyst, equity analyst, rating analyst, or simply 'analyst.' The work of a research analyst involves investigating, examining, discovering, or revising facts, principles, and theories used by financial institutions or external financial clients. The reports prepared by analysts include examinations of public records of companies or industry securities and often conclude with 'buy,' 'sell,' or 'hold' recommendations.
Origin: The profession of research analysts originated in the early 20th century as financial markets developed and securities trading became more widespread. The demand for professional analysis and advice grew among investors. The 1980s and 1990s saw significant advancements in computer technology and the internet, making the work of research analysts more efficient and complex.
Categories and Characteristics: Research analysts can be divided into sell-side analysts and buy-side analysts. Sell-side analysts typically work for brokerage firms or investment banks, and their reports are mainly provided to clients and the public. Buy-side analysts work for fund companies, hedge funds, or other institutional investors, and their analysis is primarily used for internal decision-making. Sell-side analysts are characterized by public reports and significant influence but may face conflicts of interest; buy-side analysts are characterized by confidential reports and a focus on providing decision support for institutional investors.
Case Studies: 1. A sell-side analyst, after a detailed analysis of a tech company's financial statements, discovered its significant future profit potential and issued a 'buy' recommendation, resulting in a substantial short-term stock price increase. 2. A buy-side analyst, through in-depth research of a pharmaceutical company's R&D pipeline, predicted the approval of a new drug and advised the fund manager to increase holdings in the company, ultimately bringing considerable returns to the fund.
Common Questions: 1. Are research analysts' reports always accurate? Answer: Not necessarily, as analysts' reports are based on available data and forecasts, which can be influenced by various factors. 2. How to choose a reliable research analyst? Answer: Consider the analyst's track record, professional background, and the reputation of their institution.
