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The Equity Research Analyst Career Path: The Best Escape from a Ph.D. Program, or a Pathway into the Abyss?

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• “Analyst” is a vague job title that could refer to anyone from entry-level hires in the back office to senior professionals leading teams and managing relationships.
• “Equity” seemingly has 5,192 different meanings depending on the context.
• There are different levels within the Analyst role, and the job also differs based on the company type (bank vs. dedicated research firm vs. hedge fund vs. asset management firm).
• And “Research” itself is a vague term… since all knowledge workers do some amount of research in their jobs.

Here, we’re referring to the Equity Research Analyst role at investment banks and dedicated research boutiques that produce and sell their own equity research reports .

This division is often labeled “sell-side research,” and we’ve covered it in the articles on equity research recruiting , equity research careers , equity research internships , and the equity research associate role .

We’ll pick up the coverage here and move straight to the top of the ladder:

The Equity Research Analyst Job Description

Unlike in investment banking and private equity , where the Analyst is at the bottom of the hierarchy, the Analyst sits at the top in research.

The Analyst’s job is to manage relationships with the companies they cover and the institutional investors that might be interested in those companies.

The division is known for its equity research reports , but Analysts add value mostly by setting up meetings, making introductions, and giving investors new perspectives or information they hadn’t considered.

For many decades, Analysts did this and gave away research for free to encourage institutional investors to trade with their bank, indirectly generating commissions.

Now, with MiFID II in place in Europe , institutional clients pay directly for research, so the role generates revenue more directly (or fails to do so if the clients don’t pay).

Banks in other regions can still use the old business model and give away research for free to generate trading commissions, but these new rules are likely to spread worldwide.

If you look at the main tasks in the research division:

• Speaking with market participants (management teams and investors).
• Doing industry research (e.g., collecting data on market share, pricing, etc.).
• Writing the reports (both short, update reports and longer thought pieces).
• Building models and valuations.
• Determining market sentiment.

Analysts spend most of their time on tasks #1 and #5 – building relationships and generating market insights – and little time on writing reports, building models, or collecting data.

A Day in the Life of an Equity Research Analyst

To illustrate the differences between the Associate and Analyst roles, we’ll walk through a day in the life from the perspective of an Analyst.

Note that this is a “normal day,” i.e., not one during earnings season or an important conference:

7 AM – 8 AM: Arrive at the office, read the news, and look at emails from traders and salespeople asking about a few companies in your coverage universe.

You also start reviewing a few research notes written by your two junior Associates. The numbers look fine, but the commentary is too confusing.

8 AM – 10 AM: You communicate your changes to the Associates when they arrive, and then you ask one of them to research a new digital media company in the healthcare vertical that you might want to add to the coverage universe.

The market opens, but there haven’t been any big corporate announcements or other dramatic happenings, so things are calm as you review your calendar for the day.

10 AM – 12 PM: You take several calls from institutional investor clients: one from a hedge fund Analyst at a mid-sized firm, one from a Portfolio Manager at a large asset management firm , and one from a PM at a start-up hedge fund investing in the TMT sector .

They’re all looking for insights into companies’ earnings announcements in a few weeks; a few also want to meet with the management teams of software and internet companies you cover.

12 PM – 2 PM: You head out to lunch on the other side of town to meet with the CEO and CFO of a newly public Software-as-a-Service (SaaS) company in the consumer retail vertical .

They have solid growth and cash flow numbers and want more institutional attention, so you try to explain investor skepticism toward anything retail-related (well, except for Amazon).

But you agree to make their case to a few institutional clients who have invested in the sector before.

2 PM – 3 PM: On your way over to meet with another company, you take a call in the car from an Associate PM at a growth-oriented hedge fund.

He wants to do a deep dive into one SaaS company’s “true” churn rate because he doubts the official numbers released by management.

You don’t have all the numbers in front of you, so you give vague responses and then refer him to one of your Associates to get more detail.

3 PM – 5 PM: You arrive at the other company: a digital marketing agency and online advertising platform with ~200 employees that is looking to go public in the next few years.

You explain that they’ll need much higher revenue (closer to ~$100 million rather than their current $20 million) to get there and that they’ll need to downplay the “agency” part and focus on the tech platform.

They claim that they have a new technology that will use “AI” to automate client onboarding and campaign setup, but they’re evasive about the details.

You’re quite skeptical, but if this company somehow goes public, it might be worth adding to your coverage. You also make a note to ask around about the feasibility of this technology.

5 PM – 7 PM: Head back to the office and review what the Associates have been working on all day, including a few new notes, updated models, and an Initiating Coverage Report.

You make some edits and then strategize with the one Associate about the super-persistent Associate PM who kept asking for the “real churn numbers” for that one company.

The firm is a good client, but this one guy is so demanding that you’re reconsidering the relationship. You head home after this.

11 PM: As you’re about to go to sleep, an activist hedge fund announces that it has taken a 5% stake in one of the companies in your coverage universe: a security software company.

These types of late-night / last-minute announcements are not common, but they do happen.

You’ll need to have an immediate view in the morning, so you ask your Associate to prepare a few thoughts and come in early so you can send out a short note before the markets open at 9:30 AM.

Why Become an Equity Research Analyst?

The equity research industry as a whole is not in great shape, with falling compensation, headcount reductions, and MiFID II forcing an unbundling of research.

And hardly anyone “interviews for” an Analyst role in equity research – you have to work there for a few years and win promotions up to that level.

So, if you break in as an Equity Research Associate , why would you want to stay in the field long enough to reach the Analyst level?

The short answer is, “there probably isn’t a good reason to do so,” but I like to be fair and balanced, so here’s a quick list of the pros and cons:

Advantages:

• Interesting Work and Solid Pay… for Now – Senior ER Analysts can earn in the mid-six-figures up to the $1 million range, and the work is arguably more interesting and less stressful than what Managing Directors in investment banking All signs point to falling pay, though, so who knows if this will last.
• Potential Exit Opportunities – You’re not quite as “trapped” as, say, a mid-level banker who quits and doesn’t have many other options. You could move to buy-side research roles, go into sales, join a normal company, or go into investor relations at companies or fundraising on the buy-side.
• It’s a Good “Escape Route” from Other Fields – Especially if you have something like an M.D. or Ph.D. in a highly technical field, equity research might allow you to use your expertise to move into plenty of other roles (though you don’t need to reach the Analyst level to do this).

Disadvantages:

• The Industry is Declining – It’s still possible to make money and advance in a declining industry, but it’s more difficult than it is an industry where headcounts and revenue are growing. Also, no one knows how MiFID II and passive investing will play out long-term; the impact could be anything from “neutral to slightly negative” to “apocalypse now.”
• It’s a Huge Grind to Reach the Analyst Level – You’ll have to make it through many, many, many earnings seasons and model/research updates to make it to the top. This process can get quite repetitive, especially if you’re covering an industry less prone to surprises (e.g., not tech or healthcare).

Equity Research Analyst Salary & Lifestyle

There are several different levels within the “Analyst” title, ranging from Vice President (VP) to Managing Director (MD).

At the low end, VP-level Analysts might earn around the $200K to $300K USD salary range at large banks in major financial centers.

Directors move up to the $300K to $600K range, and MDs go up to the $500K to $1 million range.

Around 50% of this compensation comes in the form of base salary, and it’s up to 75% at the lower levels.

These figures will almost certainly fall due to MiFID II and declining research budgets at buy-side firms, but you could still earn into the mid-six figures for the foreseeable future.

As you saw in the day-in-the-life account above, Analysts might work the same amount as Associates: 50-70 hours per week , with ~12-hour days on average, and longer hours during earnings season.

The key difference is that Analysts must travel a lot more , including client visits, conferences, and company meetings.

That means it’s arguably a more stressful job since they also have to review work from the Associates and give them direction.

Recruiting: Pathways into the Equity Research Analyst Role

The Analyst role is a senior one, so you don’t interview for it right out of undergrad or an MBA program.

Most often, people start at the Associate level out of undergrad or a Master’s in Finance program , stay for a few years, and then advance up to the Analyst level… if there’s an opening.

Traditionally, it has been quite difficult to move up by staying at the same bank because Senior Analysts rarely left their jobs voluntarily.

So, research professionals often moved around to different banks and advanced with each move.

Advancing to the Analyst level comes down to proving that you can do the same job that they do: speaking with clients and management teams, delivering insights, and setting up meetings – as opposed to burying yourself in models and reports all day.

Besides this path, some people move into equity research from strategy or management consulting, Big 4 firms , or even corporate finance roles.

However, they join at the Associate level unless they’re already quite senior in their previous industry.

Another option is to complete an advanced degree, such as an M.D. or a Ph.D. in a technical field (physics, engineering, biology, etc.), and then work in a group where technical knowledge is required to understand companies ( biotech , pharmaceuticals, semiconductors , etc.).

But once again, you’re unlikely to join directly at the Analyst level, so you’ll have to demonstrate your accounting/finance/business knowledge to get there and then perform well on the job to advance.

For more on these points, see the article on equity research recruiting .

The Equity Research Analyst Job: Worth the Grind or the Career Change?

In these articles, I usually conclude with an “It depends”-type answer and present both sides.

But I’ll be more definitive here: a long-term career in equity research is probably not worth it in the 2020s unless you truly love it and can’t imagine doing anything else.

Research is still a great entry point into finance because of the lack of a standard, on-cycle hiring process, and the ability to break in as a non-traditional candidate.

But there’s serious skepticism about its long-term future, and I can’t credibly recommend it as an option on-par with careers in investment banking , private equity , or venture capital .

People are also pessimistic about the future of sales & trading , but there’s a key difference: there are still opportunities there if you’re a programmer or you work with more mathematically complex products.

By contrast, there’s less room for programming or advanced math in the fundamental analysis of companies, and the negative trends in equity research affect the industry as a whole – not just specific desks or groups.

So, the Equity Research Analyst job may not be “a pathway into the abyss,” but it’s also not a career I would recommend – unless you’re so enthusiastic about research that you couldn’t imagine doing anything else.

You might be interested in:

• Biotech Equity Research: The Best Escape Plan from Medicine or Academia?
• Fixed Income Research: The Overlooked Younger Brother of Equity Research?

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street . In his spare time, he enjoys lifting weights, running, traveling, obsessively watching TV shows, and defeating Sauron.

Free Exclusive Report: 57-page guide with the action plan you need to break into investment banking - how to tell your story, network, craft a winning resume, and dominate your interviews

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16 thoughts on “ The Equity Research Analyst Career Path: The Best Escape from a Ph.D. Program, or a Pathway into the Abyss? ”

curious to know your thought on ER now? Im an undergrad studying history but am looking at internships in the ER sector for next summer in London. I have already completed a few virtual internships but am now looking to expand my experience in the financial world. Any advice would be appreciated.

I don’t think much has changed. Compensation might be a little different now, but ER is still not a great long-term career path due to MiFID II, falling numbers of boutiques, and lower fees paid for research. It’s still a decent starting option, but you normally want to move into a deal-based role or a buy-side role after spending a few years there.

Now that this report is 2 years old, curious to hear your thoughts on the outlook for ER. It appears that comp in the U.S. has remained the same since before. Do you think that the effects of MiFid II already been “priced in”? Or will comp begin to fall gradually from here on out?

I would be surprised if compensation increases substantially. It’s true that MiFID II has not been the end of the world, but the impacts on ER groups and firms has been uneven, with some growing and some shrinking. It’s probably less bad than initially feared, but still not a great industry outlook.

I’ve been reading a lot on here for the last couple weeks (love it!) and gotten really interested in Equity Research. Thing is, I’m a 35 year old woman living in Zürich with a humanities PhD leaving the academy. What I read about this career suits me to the core, but I don’t want to invest time in learning modelling and other skills if my apps will be rejected out of hand because of my humanities background. Spent 5 years as a postdoc and realised the academy is not for me, but I got my PhD from an Ivy, if that helps. Do I have any chance of getting into ER? I don’t mind the pay or the shrinking prospects. I love the idea of doing crazy amounts of research and finding things people missed, or just packaging the information so other people can get it.

I think it will be extremely difficult to get into ER if you have a humanities PhD and you’ve worked in academia up until this point. PhDs in technical fields like physics, engineering, chemistry/biology, etc., can get in, but it’s much tougher to do that from a non-technical field. You might have better luck aiming for an investor relations role or something else where communication skills are valued more than technical/accounting/finance knowledge.

Can you chime on the prospect of a career as buyside research analyst? For both equity and credit research. I’m relatively junior but have always worried about things you laid out on this article.

I think buy-side research is somewhat safer because MiFID II does not directly affect firms in a negative way, and buy-side firms will always need people to do fundamental research. Yes, fee compression hurts, but that is just one headwind vs. multiple headwinds for equity research.

I would also say that credit research, especially in areas like high-yield or distressed, is probably safer than equity research because it’s tricky to evaluate those types of bonds, and fixed income has seen less automation / passive investing than equities (yes, there are lots of bond index funds and ETFs, but most are investment-grade).

Saying to avoid it may be a little harsh. Maybe compared to IB/PE, sure, upside comp is more limited. But a job where you can work 50 hours a week and make mid 6 figures still sounds a lot better than most jobs in the corporate world. If you are a good enough associate and stick around long enough you are bound to have an open analyst seat to fill.

That’s fair enough. Though I think 50 hours a week is a bit on the low side, and I expect compensation to drop over time. I guess my thinking is that if you really want better hours, less stress, low-to-mid-six-figure compensation, and more stability, something like corporate development is better… assuming you want to work on deals. If you just want to follow companies, sure, maybe equity research is still a good option.

What about the overall future of Asset Management? Is it wise to pursue a career in Asset Management?

I think it’s also not great, but not necessarily “to be avoided” as equity research is because there’s no MiFID II that completely changes their business model. Yes, fee compression and passive investing have hurt AMs, but passive investing could turn into a giant bubble that bursts at some point, and there will always be some demand for active managers. Also, quant-like skills will become more important there. For more, please see:

https://mergersandinquisitions.com/

I’m curious, is there anywhere in the public equities realm (excluding quant roles) that you would outright recommend to someone starting today?

OK, maybe I’m being a little harsh here. It’s not that I would universally recommend against public markets / public equities roles. It’s more that if you can’t decide between deal-based roles and public markets ones, then you’re safer picking a deal-based role because they’ve held up better over time and are under less fee and headcount pressure.

That said, if you are 100% certain you want to do public markets and have the track record and experience, go ahead.

Within public equities, if you exclude quant roles, Analyst roles at any of the big long-only funds are still fine. It’s just that they don’t hire that many people and turnover isn’t that high, so it’s harder to win these roles.

As always, the more specialized you can be, the better… find a niche like emerging market stocks or a specific industry or sub-industry and become the top expert there.

For the record, I wasn’t trying to be critical of your view. It just feels like every discussion of roles in the public equities realm nowadays is very defeatist. As someone that missed the track for private investing (at least until an MBA at a minimum), it gets a bit heavy to read continuously that your career path is in decline. So I was just curious if there was anywhere that you still viewed positively.

I agree with both views on the LO seats, hard to get and not going anywhere. I would also say that if you don’t mind investing in a very short term, market neutral style, that the multi-manager opportunity set is still quite robust.

Sure, understood. I would not take all of these predictions of doom too seriously – everyone out there, including me, looks at recent history and then tries to project it forward. But things can always change, and industries have gone from positive to negative or the reverse fairly quickly. Just look at all the people who thought investment banking would “die” after the 2008-2009 period, or everyone who thought tech startups would “never come back” after the dot-com crash, etc.

If you like what you’re doing and don’t want to change paths, sure, continue on with it. And yes, multi-manager funds can be a good option as well if you like that style of trading. We did cover MM funds on this site once, but haven’t focused on it too much since I prefer long-term, fundamental analysis/investing.

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Tips on How to Get into Equity Research

#1 perform your own research and analysis, #2 get your research published on seeking alpha, #3 share your published article with equity research analysts, #4 follow up and keep networking, additional resources, how to get into equity research.

Four steps to stand out from the crowd

Getting a job in equity research can be extremely competitive .    Global investment banks and boutique firms only have so many Analysts and Associates, with a limited number of new people they hire each year.  In a competitive marketplace, our guide on how to get into equity research will share some ideas that will help you improve your odds of being hired.

The best way to get into something is to just start doing it.  There is virtually no cost (other than your time) to start looking for investment ideas and performing your own valuation modeling of companies. To get the ball rolling, follow these steps:

• Think of an industry or sector that you’re interested in (genuinely)
• Get a list of companies in the sector from Google finance or Yahoo finance
• Filter the companies down by setting criteria such as geographic location, size, the line of business, valuation, etc.
• Download the three financial statements for 3-5 of the companies from EDGAR or the appropriate filing system
• Put all the numbers into Excel, link the 3 statements , and start performing analysis
• Analyze the historical results and build a forecast based on what you think the company is capable of in the future
• Perform a discounted cash flow DCF analysis to value each company

Luckily (or not) we live in a time where it’s easy to get your content published publicly.  Seeking Alpha is a crowdsourced equity research platform where anyone, regardless of their background or experience, can publish research as long as it meets their quality requirements.

In order to get your research published on Seeking Alpha follow these steps:

• Develop a thesis about one of the stocks you researched in Step 1 above (i.e., stock is undervalued or overvalued due to x, y, and z)
• Write a thorough report (1,000 to 2,000 words long)
• Include lots of charts, graphs, and outputs from your financial model
• Use lots of headings and create a well-structured article
• Generate a bold title for the article the includes your “call” on the stock (i.e., Short: Online Company Inc Overvalued by 40-50%, Target Price is $X.XX per share)
• If your article is not approved, take the feedback provided and keep working on your research and analysis until the report is approved

Once your equity research report is published, you now have a great reason to start contacting Analysts and Associates at companies that cover the stock (or the sector) that you wrote about.  You can also use it in your application form when applying to job postings.

You can do this by following these steps:

• Find job postings at global banks or boutiques that employ analysts in the sector you researched (try looking at efinancialcareers.com for postings)
• In your cover letter (or cover email), include a hyperlink to the Seeking Alpha article you had published, explain your thesis, and why you appear to be correct or incorrect as time has passed since you originally wrote the piece
• Showcase your financial modeling and valuation skills by including the financial model you built to support your research
• Remember to take a very humble approach and explain that you did this exercise for educational purposes and have learned a lot in the process

Networking is by far the best way to get hired (in any industry) and a major component of how to get into equity research.  Networking requires a lot of persistence.  If you meet resistance as you send out your emails, be sure to ask if they know anyone else who has a strong opinion on the stock you researched.

By always asking each person you talk to for a referral, you can have a continual pipeline of new people to connect with.

At the end of the day, it’s a numbers game, and the more people you connect with and share your research with, the better your odds are of getting hired.

Read CFI’s three-part series on how to network effectively !

Thank you for reading the CFI guide on how to get into equity research.  If you follow the above steps, you will learn a lot about what it’s like to be an analyst, and hopefully, improve your chances of getting hired in a super competitive market.

To keep learning and advancing your career, these additional resources will be a big help:

• Overview of Equity Research
• Equity Research Job Description
• Financial Modeling Best Practices
• Analysis of Financial Statements
• See all career resources
• See all capital markets resources
• Share this article

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Equity Research Analyst: A Comprehensive Guide to Career Path and Qualifications

Table of Contents

Introduction.

In the world of finance, equity research plays a pivotal role in providing valuable insights to investors, guiding them in making informed decisions regarding stocks and investments. This comprehensive guide will delve into the career path and qualifications required to excel in the field of equity research. Whether you’re a budding finance enthusiast or a seasoned professional looking to further your career, this article will equip you with the knowledge and tools needed to succeed in this dynamic and competitive industry.

Understanding Equity Research

What is equity research.

Equity research is the practice of analyzing various financial instruments, primarily stocks, to provide in-depth insights into their potential for investment. This involves evaluating a company’s financial performance, industry trends, and macroeconomic factors to make informed recommendations to clients or investment firms or wealth management companies.

The Role of an Equity Research Analyst

Key Responsibilities of an Equity Research Analyst:

• Financial Analysis: Equity research analysts are responsible for dissecting a company’s financial statements, including income statements, balance sheets, and cash flow statements. They assess the company’s financial health and performance over time.
• Industry Analysis: Understanding the dynamics of the industry or sector in which a company operates is essential. Analysts need to identify industry trends, potential risks, and growth opportunities that can impact a company’s stock price.
• Company Valuation: Analysts use various valuation models, such as discounted cash flow (DCF) analysis and price-to-earnings (P/E) ratios, to determine the intrinsic value of a company’s stock. This helps investors assess whether a stock is undervalued or overvalued.
• Recommendations: Based on their analysis, equity research analysts provide buy, sell, or hold recommendations for specific stocks. These recommendations are critical for investors looking to build or adjust their portfolios.
• Report Writing: Analysts produce detailed research reports that summarize their findings and recommendations. These reports are distributed to clients, including portfolio managers and individual investors.
• Client Interaction: Analysts often have direct contact with clients, discussing their research findings and providing insights into investment opportunities. Effective communication is crucial in this role.
• Market Monitoring: Equity research analysts continuously monitor financial markets, staying updated on news and events that may impact the stocks they cover. They need to react swiftly to changing market conditions.

Qualifications for a Career in Equity Research

Educational background.

To embark on a successful career in equity research, a strong educational foundation is essential. Typically, aspiring equity research analysts hold degrees in:

• Finance: A bachelor’s degree in finance or a related field provides a solid foundation.
• Master’s Degree: Many professionals pursue a Master of Business Administration (MBA) or a Master’s in Finance for advanced knowledge.
• Certifications: Obtaining professional certifications such as the Chartered Financial Analyst (CFA) designation adds credibility.

Skills Required for Success:

• Analytical Skills: The ability to dissect complex financial data and draw meaningful conclusions is at the core of this profession.
• Industry Knowledge: In-depth knowledge of specific industries or sectors is essential to understand the nuances that can affect a company’s performance.
• Financial Modeling: Proficiency in financial modeling and valuation techniques is crucial for accurate stock analysis.
• Communication Skills: Analysts must convey their findings and recommendations clearly and persuasively in both written reports and verbal communication.
• Quantitative Skills: Strong mathematical and statistical skills are valuable for data analysis and modeling.
• Economic Awareness: Understanding macroeconomic factors and how they influence financial markets is vital.
• Information Technology: Proficiency in using financial software and data analysis tools is beneficial.
• Ethical Conduct: Equity research analysts must adhere to ethical standards and regulations to maintain the integrity of their research.
• Financial Acumen: Proficiency in financial analysis, accounting, and valuation techniques is crucial.
• Analytical Skills: The ability to dissect complex data and draw meaningful conclusions.
• Research Skills: Conduct thorough research on companies and industries.
• Communication: Effective communication is key to conveying research findings clearly and concisely.

Gaining Experience

Experience is invaluable in equity research. Consider the following steps to gain a competitive edge:

• Internships: Seek internships at financial institutions or investment firms to gain hands-on experience.
• Entry-Level Positions: Begin your career as a research associate or junior analyst.
• Networking: Build a network of professionals in the finance industry to discover job opportunities.

Career Progression

Junior analyst.

As a junior analyst, you will assist senior analysts in research tasks, data collection, and financial modeling.

Senior Analyst

With experience, you can advance to a senior analyst role, where your responsibilities will expand to include making investment recommendations and leading research teams.

Portfolio Manager

For those aiming higher, becoming a portfolio manager allows you to oversee investment portfolios and make high-level investment decisions.

Requirements To Successful Equity Research Analyst

Challenges and Rewards:

While the role of an equity research analyst can be intellectually stimulating and financially rewarding, it comes with challenges. Analysts often work long hours, especially during earnings seasons or when major events affect the market. They also need to adapt to rapidly changing market conditions and regulatory requirements.

However, the rewards include the opportunity to have a significant impact on investment decisions, the potential for a lucrative career, and the satisfaction of continuously learning about finance, economics, and various industries.

Equity research is a challenging yet rewarding career path in the world of finance. Armed with the right qualifications, skills, and determination, you can carve out a successful journey in this industry. Remember, staying updated with market trends and continuously enhancing your knowledge is key to thriving in the competitive landscape of equity research.

Start your journey today, armed with the knowledge and determination to excel in the world of equity research. Your path to success begins with a solid educational foundation, a diverse skillset, and a commitment to continuous growth. Happy investing!

Knowledgiate Team

Doctor michael burry: the investment guru who predicted the housing market crash, chartered financial analyst: mastering the world of finance, the ultimate role of chief investment officers (cios) in corporate finance, principal financial group 401k: a path to secure retirement, certified financial planner: your guide to financial success, wow mortgage: an ultimate guide to home financing, best online brokers: choose the ultimate investment platform for your needs, chart patterns: a comprehensive guide to mastering technical analysis, trading analysis: unleashing the power of data in making informed investment decisions, cost of capital: understanding the key elements and implications completely, subscribe to our mailing list to get the new articles, related articles.

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An Ultimate Guide to Equity Research

This post was originally published on August 15, 2019 and was updated for relevance on July 29, 2024.

Equity research is a specialized field within the finance industry that analyzes public companies, industries, and the overall economy. It helps investors make informed decisions about buying, holding, or selling investments.

In this guide, we’ll explore equity research, its definition, how to conduct research analysis, what goes into a research report, the various roles involved, key considerations when selecting an equity research firm, career pathways into the equity research industry, and more. 

With that, let’s get started.

What is equity research?

Before we discuss equity research, it’s important to understand the concept of equity. Equity is the full ownership of an asset once its associated debts have been settled. Equity research, or “securities research,” refers to the process investment banks use to understand a company's overall equity or value. 

Equity analysts, often working within an investment bank, lead this process. They create documents that delineate the equity in question within the context of the business, its management, the broader industry, and the economic landscape.

The larger the investment bank, the more reports an equity research team will tend to produce, and the analysis included will be more detailed. Examples of analysis include:

• Review of how the macroeconomic picture is likely to affect the company
• Operational changes or investments that are likely to affect the company’s performance
• Review the company’s financial statements and explanation of changes
• Projections on the status of the company’s revenue (and share price) and where it’s headed
• Recommendations on whether to buy, hold, or sell the company’s equity

How to conduct equity research analysis

Research is the name of the game. An Equity Research Analyst is responsible for providing vetted and trusted insights to make sound and informed investment decisions. This process is typically broken into four stages: 

1. Thorough Research

Equity Research Analysts focus on specific regions and sectors. They leave no stone unturned in conducting extensive research, thoroughly reviewing financial reports, balance sheets in Excel, earnings releases, industry trends, regulatory changes, macroeconomic factors, and more that could impact the companies they are analyzing.

2. Financial Modelling & Valuation

Financial modeling involves creating mathematical representations of a company's financial performance by forecasting future results based on historical data and assumptions. Valuation is used to determine the fair value of a company's stock using methods such as discounted cash flow analysis and comparable company analysis. These tools help evaluate a company's financial health and growth potential to advise on investments.

3. Creating Equity Research Reports

Equity Research Analysts are responsible for condensing their findings into easily understandable reports for investors. We'll expand on this more in the next section. 

4. Communication Skills & Publication

Equity Research Analysts in senior or lead positions often present their findings to their organization or client base. These individuals must be able to simplify complex financial data, so strong communication and presentation skills are essential.

What is an equity research report?

Buy-side or sell-side, an equity research report typically includes the following:

• An industry research overview that covers trends and news related to competing companies.
• A company overview that includes any recent business developments and quarterly performance results.
• The equity analyst provides an investment thesis explaining the reasons behind their prediction of the stock's performance. This section also includes the target share price, which many consider the most critical aspect of the report.
• A financial model-based forecast of the company's income, cash flow, and valuation.
• Risks associated with the stock.

Difference between a career in equity research and investment banking

Investment banking and equity research are similar but have clear distinctions in their intended outcome. Investment banking is all about helping companies raise money through stocks and bonds, offering mergers and acquisitions services, and managing significant financial deals. 

Equity research involves evaluating individual stocks and providing investment advice based on their potential value and performance.

In essence, investment banking focuses on managing financial transactions, while equity research focuses on analyzing and valuing individual stocks.

When considering a career between the two, it's imperative to evaluate the following factors: 

1. Educational Background 

Both career paths require a bachelor's degree in economics, accounting, finance, or engineering. For career growth, a Chartered Financial Analyst (CFA) designation is often required for Equity Research Analysts, while investment banking can require a Master of Business Administration (MBA). Additionally, investment bankers must pass the Series 79 exam , which measures the knowledge needed to perform the critical functions of an investment banking representative. 

2. Career Path 

In investment banking, the career path is straightforward. It starts with being an analyst, then an associate, and climbing to higher positions. In equity research, the career path could be more transparent. Typically, it involves transitioning from associate to analyst, senior analyst, and then to the role of vice president or director of research. Investment bankers have better opportunities to reach top positions because of their involvement in making deals and managing clients. They often go on to work for private equity firms for venture capitalists. Research analysts are frequently seen solely as number crunchers and not thought of as being able to drive substantial business growth.

3. Skill Set 

It should come as no surprise that Equity Research Analysts require strong analytical and mathematical skills to handle complex calculations, build predictive models, and prepare financial statements. They must also be proficient communicators capable of simplifying complex financial data. As for investment bankers, financial modeling and industry analysis are crucial early in their careers. However, as they advance, they transition to a sales-oriented mindset, excelling at closing deals and managing client relationships. 

4. Work-Life Balance 

Equity research is known for long hours, particularly during earnings season, but there are periods of relative calm. Investment banking is another beast, typically requiring brutal hours, often up to 100 hours per week. A recent article in Forbes highlighted that work-life balance has become a significant concern in investment banking. This is particularly after the reported deaths of two Bank of America employees who were said to be working up to 110 hours per week. 

5. Recognition 

Equity research reports offer visibility to associates and junior analysts. Senior analysts are sought after by the media for comments on the companies they cover. Junior investment bankers work in obscurity but gain visibility as they progress in their careers. Visibility for investment bankers significantly increases when they work on large, prestigious deals.

6. Compensation 

Investment banking generally offers higher earning potential compared to equity research. For example, according to Wall Street Oasis (WSO), investment banking associates earn between $150,000 and $200,000 with substantial bonuses, while senior vice presidents or managing directors earn over $400,000 annually. WSO also says entry-level analysts start between $50,000 and $80,000 and have the potential to make up to $500,000 as they grow to leadership positions.

Roles in equity research

In the world of equity research, it is crucial to understand the distinction between a buy-side and sell-side Equity Research Analyst. Below, we'll outline their respective areas of focus and ultimate objectives.

1. Sell-side analysts

Sell-side Equity Research Analysts work for investment banks and provide their clients with sell-side research and recommendations on stocks and other financial instruments. Their primary goal is to generate trading commissions and investment banking business for their firm.

2. Buy-side analysts

A buy-side Equity Research Analyst works for institutions that buy and sell securities, such as mutual funds, hedge funds, and pension funds. Their role involves researching and making investment recommendations for their firm's portfolios.

Best Equity Research Firms 

Below are some of the top-ranking equity search firms. 

• JP Morgan —J.P. Morgan’s Research team uses state-of-the-art technologies and innovative tools to provide clients with top-notch analysis and investment advice.
• Barclays —The equity research teams cover hundreds of stocks across the Americas and Europe, delivering event analysis, stock ideas, and sector themes. They collaborate with other teams to offer clients unique, cross-asset perspectives on industries and markets.
• Credit Suisse AG —The team has original research on over 3,000 companies with thought-provoking thematic analysis, differentiated trading ideas, and coordinated global views. 
• Bank of America Financial Center —The company offers comprehensive research and analysis for both institutional and retail clients. It encompasses over 4,000 companies across 35 global sectors in developed and emerging markets. Its research involves fundamental and technical analysis as well as hedging strategies.
• Morgan Stanley —Through timely, in-depth analysis of companies, industries, markets, and world economies, Morgan Stanley has earned its reputation as a leader in investment research.

Things to consider when hiring an equity research firm

When evaluating an equity research firm, it’s essential to consider the experience and reputation of its analysts, the firm’s track record of accurate stock picks and recommendations, the depth and quality of their research reports, the firm's access to company management and industry experts, their industry specialization, the firm's coverage universe, the timeliness of their research, and the overall transparency and integrity of their research process.

How to get into equity research

If you are considering entering the equity research space, you will likely need a finance, accounting, or economics background. Many professionals in this field begin with a bachelor's degree in finance or a related field. Those seeking career advancement often pursue a master's degree or a CFA designation to enhance their resume.

Research assistant,  junior analyst, or equity research associate are common entry-level roles. Advancing in your career will require gaining experience in financial analysis, modeling, and report writing. Developing a solid network of connections within the industry is also crucial for discovering new opportunities in equity research. Like all areas of business, networking is critical.

Staying up to date on the latest trends and news within the equity research space is important for understanding the workings of the stock market and developing strong analytical and critical thinking skills. This is crucial for ensuring high-quality, long-lasting success in equity research.

The Importance of Equity Research

As we've discussed, equity research is essential for investors as it provides valuable information and investment recommendations. It involves digging into company finances, creating financial models, and meeting with industry experts. 

Equity research supports investment decisions, evaluates securities, and guides investors and fund managers. For example, it helps predict the future growth potential of tech companies, find investment opportunities in the pharmaceutical industry, and understand how macroeconomic trends affect different sectors and stocks.

Final Thoughts 

Equity research is crucial in empowering investors to make informed investment decisions. Through comprehensive analysis of financial data, market trends, and company performance, equity research provides valuable insights that enable investors to identify attractive opportunities and manage their portfolios effectively. By leveraging the expertise of research analysts and utilizing robust analytical techniques, investors can gain a deeper understanding of the risks and potential returns associated with specific investment opportunities. Ultimately, equity research is a fundamental tool for institutional and retail investors, helping them navigate the complexities of the financial markets with confidence and clarity.

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Equity Research: A Complete Beginner’s Guide

A Former JP Morgan Equity Analyst gives a basic overview of what equity research is, different job roles, important skills, how to approach completing a research report, and exit opportunities. It also introduces some of the basic equity research vocabulary.

By Created Kacper Borowiec (2019-01-16 21:16:00)

An exhaustive but very well-thought catalog of tutorials for individuals looking for an introduction to equity research.

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All About Equity Research [The ONLY Guide You’ll Need in 2024]

Equity research is a key pillar in the world of finance that bridges the gap between companies, investors, and the market . In this guide, we will delve deep into the world of equity research, exploring its purpose, the process, the roles involved, and the skills required to succeed in this field.

We’ll also discuss the types of equity research, dissect the intricacies of equity research reports, and shed light on the exciting job opportunities this sector offers. Furthermore, we will touch upon the evolving trends in equity research and how they’re shaping the industry’s future.

Let’s get started-

What Is Equity Research?

In the world of finance, ‘equity’ refers to the ownership of assets after all debts associated with those assets are paid off. In simpler terms, if you were to sell all of your company’s assets and pay off its debts, the leftover money would represent your company’s equity. Hence, equity research is an in-depth analysis of a company’s total equity or value.

But equity research isn’t just a mere calculation of assets and liabilities. It’s a rigorous, methodical examination of all the aspects that contribute to a company’s financial performance, and thus, its equity. It is akin to a detective’s investigation, digging through layers of financial statements, market trends, sector overviews, and macroeconomic factors to arrive at a comprehensive understanding of a company’s financial standing and future prospects.

Understanding Equity Research With a Simple Example

Let’s illustrate this with an example. Suppose an equity research analyst is studying a pharmaceutical company . They won’t only look at the balance sheets or profit and loss statements. They’ll consider factors such as the company’s research and development efforts, the potential market for new drugs, any pending patents, the status of regulatory approvals, and even the broader trends in the healthcare industry.

They might investigate how the company performed during different economic conditions, how well its product pipeline compares to competitors, and how regulatory changes could impact future earnings.

The analyst will also look at macroeconomic indicators. For instance, if a new law threatens to increase the cost of a raw material vital to the company’s main product, that could impact the company’s future profitability, and the analyst would need to factor this into their analysis.

At the end of this investigation, the equity research analyst forms an estimation of the company’s intrinsic value, which they then compare to its current market value . If the intrinsic value is significantly higher than the market value, the analyst might recommend the stock as a good buy, as it’s likely undervalued . On the other hand, if the market value is much higher than the intrinsic value, the stock might be overpriced , and the analyst might recommend investors to sell or avoid it.

Equity research, in essence, is this deep dive into the world of a company’s financials , providing a guide to investors, helping them navigate through their investment journey. It’s the compass that points towards profitable investment decisions.

Roles and Responsibilities of an Equity Research Analyst

An Equity Research Analyst acts as a conduit between investors and the ever-dynamic financial markets, providing them with information and insights necessary to make sound investment decisions. Let’s see how their day looks like –

Deep-Dive Research

Their day-to-day responsibilities start with conducting extensive research i nto specific companies or sectors. They meticulously scrutinize financial reports, balance sheets, cash flow statements, and earnings releases. However, their research isn’t limited to mere numbers. They also keep tabs on industry trends, regulatory changes, and macroeconomic factors that could impact the companies they are following.

Example – An analyst is covering technology companies, they need to be abreast of developments like privacy legislation, advancements in artificial intelligence, or shifts in consumer behavior towards tech products. This requires constant learning and staying updated with news and trends in the sector.

Financial Modelling and Valuation

Equity Research Analysts are also adept at creating complex financial models . They use these models to project future earnings , based on various potential scenarios. Based on these projections, they calculate the intrinsic value of a company’s shares.

Example – Let’s say there’s an auto company that’s planning to launch a new electric car model. An Equity Research Analyst covering this company would build a financial model to estimate additional revenues from this new model, the costs associated with its production, the potential impact on the company’s market share, and so on. They would then use these estimates to calculate what this could mean for the company’s future profitability , and how it could impact the company’s share price.

Also Read: All About Financial Modeling [The ONLY Guide You’ll Need in 2024]

Writing Equity Research Reports

One of the key deliverables of an Equity Research Analyst is the Equity Research Report. These reports encapsulate the findings of their research and analysis in a format that’s digestible for investors. The report typically includes

• An overview of the company
• A summary of recent developments
• Detailed financial analysis
• Future projections, and
• Most importantly, an investment recommendation (buy, hold, or sell)

The equity research reports have a broad audience – institutional investors, retail investors, fund managers, and sometimes, the companies themselves. Given the diverse readership, the reports need to be accurate, unbiased, and clear. A well-written report can significantly influence investment decisions, underscoring the responsibility on the analyst’s shoulders.

Communication and Presentation

Finally, an Equity Research Analyst often has to present their findings to clients, fund managers, or within their own organizations. This could be through conference calls, presentations, or even TV interviews. Hence, strong communication skills and the ability to explain complex financial concepts in a simple way are essential traits for an Equity Research Analyst.

The Process of Equity Research

The process of equity research is like peeling back the layers of an onion to reveal the core truth about a company’s financial health and potential. It involves multiple steps, each equally important in creating a well-rounded view of the company.

Step 1: Selection of Companies

The first step in equity research is the selection of companies. Analysts often specialize in specific sectors or industries , such as technology, healthcare, or energy. The choice of companies to analyze within those sectors depends on several factors, including market capitalization, relevance in the industry, or particular events like mergers or IPOs.

Step 2: Industry Analysis

After choosing the companies, analysts start with a broad industry analysis . They look at the industry size, growth rate, major competitors, regulatory environment, and key trends. This macro view provides context for the company’s operations and potential growth.

Step 3: Company Analysis

Once they’ve understood the industry context, analysts move onto detailed company analysis. This involves a deep dive into the company’s financial statements, including balance sheets, income statements, and cash flow statements. They also examine the company’s business model, products or services, competitive positioning, management quality, and corporate governance practices.

Step 4: Financial Modelling and Projections

After developing an in-depth understanding of the company, analysts use this information to build detailed financial models. These models involve projections of the company’s future revenues, expenses, and earnings, often under different scenarios. For example, they might project how the company’s earnings could be affected under different economic conditions or if a new product line succeeds or fails.

Step 5: Valuation

The next step is the valuation, where analysts use techniques such as Discounted Cash Flow (DCF) analysis, Price/Earnings (P/E) ratio, or Comparables analysis to estimate the intrinsic value of the company’s shares . This value is then compared with the current market price to determine whether the company’s shares are undervalued or overvalued.

Step 6: Report Writing and Recommendation

Finally, analysts compile their research findings, financial model outputs, and valuation results into a comprehensive equity research report . The report also includes a recommendation, typically a ‘buy’, ‘hold’, or ‘sell’ for the company’s stock based on the analyst’s analysis.

It’s important to note that equity research is a continuous process . Companies release financial information quarterly, industry trends evolve, and macroeconomic conditions change. Therefore, analysts regularly update their reports to reflect the most recent data and insights.

Key Aspects of Equity Research Reports

An Equity Research Report is a comprehensive document that encapsulates an analyst’s view of a company, sector, or industry . These reports are essential tools that investors use to understand and navigate the financial markets. Here are the key aspects of an equity research report:

Executive Summary

Every report begins with an executive summary that provides a brief overview of the analyst’s findings and recommendations. This part is designed to provide a quick snapshot of the key takeaways from the report.

Company Overview

This section provides a detailed description of the company , including its history, management, product or service offerings, and business model. It also includes an overview of the company’s key strategies and competitive advantages. This information helps readers understand the company’s operations and its position within its industry.

Industry Overview

The industry overview offers an analysis of the broader sector or industry in which the company operates. It covers aspects such as industry size, growth rates, key trends, major competitors, and regulatory environment . This context is crucial in understanding the company’s potential for growth and the challenges it might face.

Financial Analysis

In this part of the report, the analyst presents their detailed analysis of the company’s financials. This usually includes examination of the i ncome statement, balance sheet, and cash flow statement. The analyst may also discuss financial ratios, growth rates, profitability metrics, and other key financial indicators. This section provides insights into the company’s financial health and performance.

Financial Projections and Valuation

The heart of the equity research report is the financial projections and valuation section. Here, the analyst lays out their forecasts for the company’s future earnings and financial performance. They also present their valuation of the company’s stock, typically arrived at using financial modelling techniques like Discounted Cash Flow (DCF), Price/Earnings (P/E) ratio, or Comparables analysis.

Investment Thesis and Recommendations

In the final section, the analyst presents their investment thesis – their argument for why an investor should or should not invest in the company’s stock. They also provide a clear investment recommendation, typically a ‘buy’, ‘hold’, or ‘sell’ rating. This section is the culmination of all the analyst’s research and analysis.

Types of Equity Research

Equity research is carried out by different types of institutions for various purposes . Understanding the differences among them can help in comprehending the perspectives and potential biases in the research. Here are the key types of equity research:

Sell-Side Equity Research

Sell-side analysts work for brokerage firms and investment banks. Their research is primarily aimed at selling securities, providing investment recommendations, and facilitating transactions , which helps their companies earn brokerage and transaction fees. Sell-side research is generally freely available, and the firms distribute it widely to attract business from institutional and retail investors.

Buy-Side Equity Research

Buy-side analysts work for institutional investors such as mutual funds, hedge funds, pension funds, and insurance companies. They conduct research to assist the fund’s managers in making investment decisions for the fund’s portfolio. Their research is typically proprietary and is used solely for the benefit of the fund that employs them.

Independent Equity Research

Independent equity research firms are third-party entities that aren’t directly involved in trading securities. They sell their research to hedge funds, asset managers, and sometimes individual investors . Since these firms don’t have a trading department and aren’t seeking investment banking business, their research is perceived as unbiased. They have gained popularity over the past decade due to their perceived objectivity.

Internal Equity Research

Large corporations often have their internal equity research teams. These analysts perform research on competitors, suppliers, and customers to assist in strategic decision-making. This research is generally not available to the public as it is used for internal corporate strategy and planning purposes.

Each type of equity research has its strengths and weaknesses , and they all play essential roles in the financial ecosystem. Understanding their differences and potential biases can help investors and decision-makers use this research more effectively.

Skills Required for a Career in Equity Research

Equity research is a challenging and intellectually demanding field that requires a combination of hard and soft skills. If you’re considering a career in equity research, here are the key skills you’ll need to succeed:

Financial Literacy

A fundamental understanding of financial principles is the bedrock of equity research. This includes knowledge of financial accounting, corporate finance, economics, and statistics . Analysts need to be comfortable reading and interpreting financial statements, calculating financial ratios, and understanding economic indicators.

Analytical Skills

Equity research involves extensive data analysis. Analysts need to sift through large volumes of data, spot trends, interpret complex information , and draw meaningful conclusions. Strong analytical skills are crucial to understand the past performance of a company and make accurate forecasts about its future.

Financial Modelling

Financial modelling is an essential tool in an equity researcher’s arsenal. Analysts use financial models to forecast a company’s future revenues and earnings and estimate the intrinsic value of its shares. Proficiency in Excel and familiarity with valuation techniques such as discounted cash flow (DCF) and comparable company analysis is a must.

Attention to Detail

The devil is often in the details when it comes to equity research. Analysts need to pay close attention to the footnotes in financial statements, the nuances in a CEO’s comments during an earnings call, or the implications of a regulatory change. A small detail can sometimes have a significant impact on a company’s valuation.

Communication Skills

Analysts need to communicate their findings effectively. This includes writing clear, concise research reports that can be understood by people without a financial background. It also involves presenting and defending their views to clients, colleagues, and sometimes, the media. Strong written and verbal communication skills are vital.

Curiosity and Continuous Learning

Equity research analysts need to stay on top of industry trends, economic news, and changes in financial regulations. This requires a natural curiosity and a commitment to continuous learning. An analyst who stops learning risks falling behind in the fast-paced world of finance.

Job Opportunities in Equity Research

Equity research provides a host of job opportunities in a range of firms including investment banks, asset management companies, research firms etc. Let’s understand these roles, their typical responsibilities, average salaries in India, and potential employers:

Equity Research Analyst

As an Equity Research Analyst, you’ll delve deep into company financials, industry trends, and macroeconomic factors to provide investment recommendations. You may focus on a specific sector or cover a broad range of industries. This role involves financial modelling, report writing, and communicating with clients and company representatives.

Average Salary in India : ₹ 7-10 Lakhs per annum Employers : Major employers include JP Morgan, Goldman Sachs, Morgan Stanley, Credit Suisse, Kotak Securities.

Associate Analyst

Those just starting in equity research often begin as Associate Analysts. Working closely with senior analysts, Associates help in collecting data, building financial models, and drafting research reports. It’s a role that provides a solid foundation in the fundamentals of equity research.

Average Salary in India : ₹ 4-6 Lakhs per annum Employers : Firms like Ernst & Young, KPMG, Deloitte, and PwC.

Senior Analyst/Research Director

With experience, an Analyst or Associate can move up to become a Senior Analyst or Research Director. These roles involve more strategic oversight, including deciding which companies or sectors to cover, mentoring junior analysts, and representing the firm to clients, the media, and the public.

Average Salary in India : ₹ 12-20 Lakhs per annum Employers : Multinational banks and brokerage firms like Citigroup, Barclays, ICICI Securities.

Portfolio Manager

Some equity research analysts transition into portfolio management roles over time. As a Portfolio Manager, you would use the insights from equity research to make investment decisions for a fund or portfolio. This role requires a deep understanding of financial markets, risk management, and asset allocation strategies.

Average Salary in India : ₹ 15-25 Lakhs per annum Employers : Asset management companies like HDFC Asset Management, ICICI Prudential, Reliance Nippon Life Asset Management.

Equity Strategist

Equity Strategists work with a macro view, examining factors like economic indicators, industry trends, and market data to provide investment strategies and identify attractive sectors or themes in the market. While less company-specific than an analyst role, strategists still utilize many of the research and analytical skills developed in equity research.

Average Salary in India : ₹ 10-18 Lakhs per annum Employers : Major investment banks and financial services firms like Deutsche Bank, HSBC, UBS.

Investor Relations Role

Equity research analysts can also move into investor relations roles within companies. These professionals communicate with shareholders, analysts, and the broader financial community. Understanding the perspective of equity analysts is valuable in this role since you’ll be communicating key financial and strategic information about the company to the investment community.

Average Salary in India : ₹ 9-15 Lakhs per annum Employers : Large corporations across industries like Tata Group, Reliance Industries, Infosys, Wipro.

Sales & Trading

Some equity research professionals transition into roles in sales & trading. In this capacity, they use their deep knowledge of industries and companies to advise clients on investment strategies, facilitate transactions, and connect buyers and sellers in the financial market.

Average Salary in India : ₹ 8-16 Lakhs per annum Employers : Banks and brokerage firms such as Axis Bank, HDFC Bank, Edelweiss, Sharekhan.

Trends and Future of Equity Research

Equity research, like all facets of finance, is continually evolving in response to changing regulations, technologies, and investor behaviours. Here are some of the current trends and potential future developments in the field:

Digitization and Automation

The digitization of financial information and the development of advanced data analytics tools are transforming the way analysts conduct research. Automated tools are increasingly being used to collect and process data, allowing analysts to focus more on interpreting the data and generating insights.

For example , artificial intelligence (AI) and machine learning (ML) tools are now used to analyze financial statements, track sentiment in news articles and social media, and even to predict future stock price movements.

Increased Regulatory Oversight

In recent years, regulators around the world have been placing increased scrutiny on equity research to promote transparency and prevent conflicts of interest.

For example , the European Union’s MiFID II regulations now require investment firms to separate the costs of research from trading fees. This has led to more demand for independent research and is forcing sell-side firms to demonstrate the value of their research more explicitly.

Demand for ESG Analysis

There’s a growing trend among investors to consider Environmental, Social, and Governance (ESG) factors in their investment decisions. This is leading to increased demand for equity research that includes analysis of companies’ ESG performance. Analysts are now required to assess factors such as a company’s carbon footprint, its labor practices, and its board diversity in addition to its financial performance.

Crowdsourced Equity Research

Crowdsourced equity research platforms, where independent analysts and investors share their research and opinions, are gaining popularity. These platforms offer a wider range of views and analyses than traditional equity research sources. However, they also pose new challenges in terms of verifying the credibility of the information.

Emergence of Alternative Data

Equity researchers are increasingly using alternative data – information derived from non-traditional sources like s ocial media sentiment, satellite imagery, or website traffic data – to gain additional insights into a company’s performance. These data sources can provide real-time indicators that can complement traditional financial data and provide an edge to the analysts.

Equity research serves as a vital link between companies, investors, and the financial markets . It involves detailed analysis of financial data, sector trends, and macroeconomic factors to formulate clear, actionable investment recommendations.

With its varied roles – from Equity Research Analysts to Portfolio Managers, and from Equity Strategists to Investor Relations Roles – this field offers numerous career paths, each with its own unique blend of challenges and rewards.

Whether you’re a finance enthusiast exploring career paths or an investor seeking insights into your investment choices, understanding the nuances of equity research is highly beneficial. So take the leap, dive deep, and explore the rewarding world of equity research!

Frequently Asked Questions

Equity research analysts examine financial data, conduct analyses, build financial models, and write research reports to make investment recommendations.

Skills include strong analytical abilities, understanding of financial markets, proficiency in financial modeling, and excellent communication skills.

CA Yash Jain

Bain & Co. 5000+ Students Trained in the field of Investment Banking, FRM & CFA

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What does an Equity Research Analyst do?

An equity research analyst is responsible for analyzing stock and securities markets, generating reports and performance projections, and advising clients on the best options for clients' financial portfolios. Equity research analysts should have excellent knowledge of the current stock market trends, especially the availability of the securities to identify investments that would sell in public. They evaluate the clients' needs out of their investment interests and risk appetite. An equity research analyst must be highly-communicative and analytical, especially on responding to clients' inquiries and concerns and informing investment managers on the stock and securities available.

• Responsibilities
• Skills And Traits
• Comparisions
• Types of Equity Research Analyst

Equity research analyst responsibilities

An equity research analyst plays a significant role in evaluating investment opportunities and providing performance projections for clients. They conduct market research, perform fundamental and technical analysis, and develop financial models for various sectors such as healthcare, entertainment, and technology. They also interpret and integrate political and regulatory changes into industry forecasts and valuation models. Additionally, they communicate investment recommendations and contribute to portfolio management processes. As Octavian Ionici PhD from American University states, "Being able to articulate what sparked their interest in the financial field and why they are interested in a chosen role will be an advantage during the hiring process."

Here are examples of responsibilities from real equity research analyst resumes:

• Manage trade executions and broker relationships for all portfolio positions across several banks, prime brokerage accounts and electronic commodities exchanges.
• Perform bottom-up fundamental analysis covering U.S. and European equities focuse on value.
• Experience in client presentation of investment ideas and are responsible of generating detail PowerPoint slides.
• Propose investment recommendations (buy/sell equity securities) base upon a combination of fundamental qualitative and quantitative analysis.
• Support activities including industry analysis, company specific competitive analysis, risk assessment, management assessment and valuations like DCF analysis.
• Develop analytical tools for the traders to analyse volatility and correlation using VBA and SQL.
• Utilize IBM SPSS, a statistical analytic tool, to analyze raw data collect from university applicants.
• Used SPSS to process survey data, generate factor analysis and cluster analysis to determine the internal association.
• Utilize Matlab for calculations and plots relevant for finding detection ranges of submarines and analyzing the sound waves that propagate underwater.
• Participate in securities research program.
• Create and present PowerPoint presentations to both regional and national judg
• Perform fundamental analyses using macro data and company/industry trends to generate actionable investment/trading ideas.
• Provide macro and quantitative analysis to identify investment opportunities for the firm's investment decision making processes.
• Generate, diligence and continuously develop fundamental investment advisory research of public equities as an industry generalist.
• Screen and pitch buying/selling opportunities using extensive DCF and relative value models modify for the unique characteristics of individual sectors.

Equity research analyst skills and personality traits

We calculated that 14 % of Equity Research Analysts are proficient in Financial Models , Macro , and Securities . They’re also known for soft skills such as Computer skills , Math skills , and Analytical skills .

We break down the percentage of Equity Research Analysts that have these skills listed on their resume here:

Constructed and maintained financial models, wrote company and industry-related research notes for publication, and attended industry and company-related briefings.

Conducted macro & micro-economic analyses to identify market trends, industry conditions.

Analyzed potential securities using fundamental analysis and valuation techniques such as Discounted Cash Flow and Relative valuation model.

Monitored current positions in equity portfolios and communicated relevant issues impacting stock holdings to portfolio managers.

Perform bottom-up fundamental analysis covering U.S. and European equities focused on value.

Research methodology was primarily fundamental analysis coupled with a top-down outlook on the economic, competitive, regulatory and legal environments.

"financial models," "macro," and "securities" are among the most common skills that equity research analysts use at work. You can find even more equity research analyst responsibilities below, including:

Computer skills. To carry out their duties, the most important skill for an equity research analyst to have is computer skills. Their role and responsibilities require that "financial analysts must be adept at using software to analyze financial data and trends, create portfolios, and make forecasts." Equity research analysts often use computer skills in their day-to-day job, as shown by this real resume: "established equity research coverage of computer services companies for a regional brokerage firm. "

Math skills. Another essential skill to perform equity research analyst duties is math skills. Equity research analysts responsibilities require that "financial analysts use mathematics to estimate the value of financial securities." Equity research analysts also use math skills in their role according to a real resume snippet: "value-based quantitative analysis and qualitative due diligence on current positions and potential prospects. "

Analytical skills. equity research analysts are also known for analytical skills, which are critical to their duties. You can see how this skill relates to equity research analyst responsibilities, because "financial analysts must evaluate a range of information in finding profitable investments." An equity research analyst resume example shows how analytical skills is used in the workplace: "provide ancillary analytic support for growth equity co-investment opportunities by conducting market research and financial statementand financial multiple analysis. "

Communication skills. For certain equity research analyst responsibilities to be completed, the job requires competence in "communication skills." The day-to-day duties of an equity research analyst rely on this skill, as "financial analysts must be able to clearly explain their recommendations to clients." For example, this snippet was taken directly from a resume about how this skill applies to what equity research analysts do: "generated positive alpha in multiple sectors, including financial services, utilities, telecommunication services, and real estate investment trusts. "

Detail oriented. A commonly-found skill in equity research analyst job descriptions, "detail oriented" is essential to what equity research analysts do. Equity research analyst responsibilities rely on this skill because "financial analysts must pay attention when reviewing a possible investment, as even small issues may have large implications for its health." You can also see how equity research analyst duties rely on detail oriented in this resume example: "analyzed historical financial data and developed detailed financial forecasts. "

All equity research analyst skills

The three companies that hire the most equity research analysts are:

• Bank of America 24 equity research analysts jobs
• JPMorgan Chase & Co. 15 equity research analysts jobs
• Citi 11 equity research analysts jobs

Choose from 10+ customizable equity research analyst resume templates

Compare different equity research analysts

Equity research analyst vs. finance professional.

The primary job of finance professionals is to provide financial services using their knowledge of finance, tax laws, and accounting. These professionals typically help with corporate finance, personal finance, or both. Their duties include helping clients develop financial plans that will ensure their financial stability, developing the company's financial strategy, and forecasting corporate profits and losses. Additionally, finance professionals are responsible for negotiating credit lines, preparing financial statements, and working closely with outside auditors. To become successful in this role, you need to have strong customer service and analytical skills .

There are some key differences in the responsibilities of each position. For example, equity research analyst responsibilities require skills like "financial models," "macro," "equity portfolio," and "fundamental analysis." Meanwhile a typical finance professional has skills in areas such as "excellent interpersonal," "strong work ethic," "financial objectives," and "financial products." This difference in skills reveals the differences in what each career does.

Equity research analyst vs. Investment associate

An investment associate's primary role is to review a company's financial data, recommend investment strategies, oversee the distribution of stocks, and calculate possible risks for business mergers. They also serve as a mediator during agreements between companies during takeovers, monitors stock inventory, sell stocks, and details all financial transactions. In the course of these responsibilities, an investment associate provides administrative support and timely response to client requests as needed, acting as an additional point of communication for clients.

While some skills are similar in these professions, other skills aren't so similar. For example, resumes show us that equity research analyst responsibilities requires skills like "equity portfolio," "fundamental analysis," "technology sector," and "fundamental research." But an investment associate might use other skills in their typical duties, such as, "customer service," "client service," "client relationships," and "wealth management."

Equity research analyst vs. Analyst internship

An analyst internship is a student program where an intern is assigned to assist analyst professionals by analyzing business goals, objectives, and needs. Analyst interns assist in the planning and designing of business processes and suggest recommendations for improvement. They conduct research and analysis to support business operations and resolve issues using systems and data. They also help estimate the costs and benefits of multiple business actions and help the business organization launch new initiatives.

The required skills of the two careers differ considerably. For example, equity research analysts are more likely to have skills like "macro," "securities," "equity portfolio," and "technology sector." But a analyst internship is more likely to have skills like "financial statements," "data analysis," "management system," and "python."

Equity research analyst vs. Finance management analyst

A finance management analyst specializes in performing extensive research and analysis to devise strategies that can help a company achieve its long-term financial goals. Their responsibilities typically revolve around having an in-depth understanding of the company and its services, gathering and reviewing its financial history and other portfolios, and determining investment opportunities to earn a significant profit. Furthermore, a finance management analyst must report their findings and present action plans, providing a comprehensive explanation to officials, all while adhering to the company's policies and regulations.

Even though a few skill sets overlap between equity research analysts and finance management analysts, there are some differences that are important to note. For one, an equity research analyst might have more use for skills like "macro," "equity portfolio," "fundamental analysis," and "due diligence." Meanwhile, some responsibilities of finance management analysts require skills like "financial management," "financial issues," "management reports," and "financial policies. "

Types of equity research analyst

• Finance Analyst

Research Analyst

• Pricing Analyst
• Investment Analyst
• Contract Analyst

Updated June 25, 2024

Editorial Staff

The Zippia Research Team has spent countless hours reviewing resumes, job postings, and government data to determine what goes into getting a job in each phase of life. Professional writers and data scientists comprise the Zippia Research Team.

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How To Do Equity Research: An Actionable Guide

October 8, 2023

Are you ready to learn how to do equity research? Here is the truth. 

Whether you are a finance student, a career switcher, or an aspiring analyst, mastering equity research is your ticket to financial expertise and success. 

How to do equity research? To conduct an effective equity research : Start by defining your  investment objectives  and  risk tolerance .  Select stocks  based on financial stability, competitive positioning, and management quality.  Analyze financial statements, industry dynamics, and market conditions, and use valuation methods like DCF and comparative analysis.  Finally,  continuously monitor your portfolio  and stay informed about market developments to make informed investment decisions.

In this guide, you will learn the actionable tips to do equity research.

But where do you start, and how do you navigate this complex field of equity research?

It does not happen overnight, and it demands dedication, effort , and, most importantly, a burning passion for what you are doing.

An equity research analyst’s job isn’t just about crunching numbers and dissecting financial statements. 

It is about uncovering opportunities, managing risks , and ultimately making choices that can transform your financial future . 

It is about taking control of your investments and not leaving your financial destiny to chance, and that’s what you will learn in this guide.

Ready to learn? Let’s get started!

Actionable Steps – How To Do Equity Research

Sell-side firms create equity research to assist investors and hedge fund managers in identifying market prospects and enabling them to make well-informed investment choices.

Investment analysts rely on equity research and financial modeling to assess the potential risks and returns associated with various investment opportunities in the stock market.

Follow the following specific tips and strategies for each stage of the equity research process. 

Actionable Steps for Conducting Equity Research

These actionable insights will empower you to make informed decisions and excel in your own equity research firm and journey.

Step 1: Define your objectives

You need to start by defining your goals in order to stay on track. Here are a few of them:

What are you trying to achieve? 

Are you seeking stocks for long-term growth, short-term gains, or dividend income? 

Step 2: Choose your stocks

Begin by selecting the stocks you want to analyze. You can focus on a particular industry, market sector, or geographical region.

Criteria for selecting stocks

Financial stability:  Look for companies with a strong financial foundation, including healthy balance sheets, consistent revenue growth, and manageable debt.

Competitive position:  Identify firms with a competitive advantage, whether it is through innovative products, a strong brand, or dominant market share.

Management quality:  Assess the leadership team’s track record and integrity. A skilled and ethical management team can significantly impact a company’s success.

Diversification is key; don’t put all your eggs in one basket. Let’s talk about how to identify industries and sectors of interest:

Follow your passion:  Start with industries or sectors you are genuinely interested in. Your passion can be a powerful motivator for in-depth research.

Market trends:  Keep an eye on emerging market trends and technologies. Invest in industries with long-term growth potential.

Step 3: Gather data

At this stage, your financial literacy and data sources come into play. Collect essential financial data on the selected companies, including their financial statements, earnings reports, and relevant market data.

Where to find reliable financial data and news sources

• SEC filings:  The  U.S. Securities and Exchange Commission’s EDGAR  database is a goldmine for company filings and reports.
• Financial news websites:  Reputable financial news websites like  Bloomberg ,  CNBC , and  Reuters  provide up-to-date market news and analysis.

Company websites: Company websites often offer investor relations sections with financial reports and presentations.

Tools and resources for fundamental analysis

Stock screeners:  Utilize stock screening tools to filter stocks based on specific criteria like market cap, P/E ratios, or dividend yield.

• Financial analysis software:  Consider using software like  Microsoft Excel  or specialized financial analysis tools for in-depth number crunching.

Step 4: Analyze financials

Assess profitability, liquidity, debt levels, and cash flow. Look for trends, anomalies, and red flags. Financial ratios like  P/E , P/B, and ROE are your tools for evaluation.

Key Ratios and Metrics

Price-to-Earnings (P/E) Ratio:  Helps you gauge a stock’s relative value. A lower P/E may indicate an undervalued stock.

Return on Equity (ROE):  Measures a company’s profitability in relation to shareholders’ equity. High ROE can signal efficient use of capital.

Debt-to-Equity Ratio:  Assesses a company’s leverage. Lower debt ratios are generally preferable.

Analyzing financial statements

Income Statements:  Focus on revenue trends, profit margins, and earnings growth.

Balance Sheets:  Examine assets, liabilities, and equity to understand a company’s financial position.

Cash Flow Statements:  Evaluate cash flow from operations, investing, and financing activities.

Step 5: Industry and market analysis

Zoom out and examine the broader industry and market dynamics. 

How does the company compare to its peers? 

Are there any sector-specific risks or opportunities?

How to evaluate a company’s management, competitive advantage, and industry position

Management assessment:  Investigate the CEO’s vision, track record, and transparency. Good leadership can steer a company to success.

Competitive advantage:  Identify what sets the company apart, whether it’s a unique product, strong brand, or cost leadership.

Industry position:  Understand the company’s position within its industry and its growth prospects compared to peers.

How to assess external factors

PESTEL Analysis:  Evaluate Political, Economic, Social, Technological, Environmental, and Legal factors that can impact the company’s performance.

SWOT Analysis:  Assess the company’s Strengths, Weaknesses, Opportunities, and Threats to gain a holistic perspective.

Step 6: Company valuation

Now that earnings estimates are out, it’s time for senior analysts, fund managers , hedge fund managers, and institutional investors to get into equity research and determine the intrinsic value of the stocks.

Methods for determining intrinsic value

Discounted Cash Flow (DCF):  Discounted Cash Flows estimate the present value of future cash flows, considering factors like growth rates and discount rates.

Comparative Analysis:  Compare a company’s financial metrics to industry benchmarks or similar firms.

Earnings Multiples:  Use P/E ratios, Price-to-Sales (P/S) ratios, or Price-to-Book (P/B) ratios to gauge relative value.

Step 7: Risk assessment

Assess the risks associated with each stock. Consider both company-specific risks (e.g., management issues) and market risks (e.g., economic downturns). 

Your earlier definition of risk tolerance will guide you here.

How to identify and mitigate investment risks:

Diversification:  Spread your investments across various asset classes and industries to reduce risk.

Beta and volatility:  Understand a stock’s beta to gauge its sensitivity to market movements. Lower beta stocks tend to be less volatile.

Step 8: Make recommendations

Based on your analysis, make investment recommendations. Should you buy, sell, or hold each stock? 

Back your recommendations with solid reasoning from your research reports.

Step 9: Create a portfolio

Diversify your investments in investment banks by creating a well-balanced portfolio of various securities research by investment banks. 

Allocate your funds among the chosen stocks by the investment bank based on your research and risk tolerance by the investment banks.

Strategies for ongoing portfolio management

Regular check-ins:  Review your portfolio periodically to ensure it aligns with your investment goals.

Stay informed:  Keep up with company news, industry trends, and market conditions.

Rebalance as needed:  Adjust your portfolio allocation as market conditions and your objectives evolve.

When to buy, hold, or sell stocks

Buy:  When your research suggests a stock is undervalued and aligns with your investment strategy.

Hold:  Maintain positions in fundamentally sound companies, even during market fluctuations.

Sell:  If a stock no longer meets your criteria, consider selling to reallocate funds to more promising opportunities.

Step 10: Monitor and adjust

Your equity research journey does not end after you have made your initial investments. Continuously monitor your portfolio and the market. 

Stay informed about a company’s stock price, news, economic changes, and industry developments. Be ready to adjust your portfolio as needed.

Step 11: Learn and evolve

Equity research is an ongoing process. Keep learning, refining your research skills, and adapting to changing market conditions. 

Stay curious and open to new investment ideas and opportunities.

By breaking down the equity research process and conducting it as illustrated in the above stages, you will not only make the journey less daunting but also increase your chances of making informed, successful investment decisions.

How To Do Equity Research – A Brief Outline

Now that you have learned the steps to do equity research, have an overview of the fundamentals of equity research to gain confidence with the process.

So, what’s the deal with the private equity and research firms , and why should you care? Let’s break it down.

What is Equity Research?

Equity Research is the art and science of digging deep into publicly traded companies, their financial health, and the overall market to make informed investment decisions.

Equity Research in Financial Analysis- Role

Think of equity research as the guiding light in financial data. 

Analysts examine everything from a company’s financial statements, industry trends, and competitive landscape to predict how well a stock might perform. 

They are like the weather forecasters of the stock market, helping investors navigate the stormy seas and seize sunny opportunities.

For instance , let’s say you are considering investing in a tech giant like Apple.

Equity research would involve scrutinizing Apple’s financial reports, assessing its market share, and examining the latest innovations in the tech industry. 

By doing so, analysts can recommend whether it’s a golden apple worth biting into or one that might leave a sour taste.

What Does an Equity Research Analyst Do?

As an equity research analyst, your primary responsibilities will involve conducting comprehensive financial analysis, studying company performance, and monitoring market conditions.

Buy-side analysts  

A buy-side firm include a wealth management firm, a pension fund firm’s investment managers, or a hedge fund.

An equity research analyst supplies information and recommendations to the firm’s investment and portfolio managers themselves, who oversee client investment portfolios and make final decisions about what securities to hold. 

Buy-side equity researchers and analysts study and build financial research on companies.

Sell-side analysts

In a sell-side firm, an equity research analyst provides research and analysis on various stocks and companies to help the sell-side analyst and sell-side equity research firm’s clients, institutional investors, make informed investment decisions. 

Sell-side brokerage firms’ equity research analysts monitor market data, publish research reports, make recommendations, and often engage in interactions with clients to provide insights and guidance related to equity investments.

You will use this information to generate insightful research reports and provide investment recommendations to assist clients or your firm in making informed decisions about buying, selling, or holding stocks.

Effective communication and staying up-to-date with industry developments are key aspects of success in this role.

Do you know how investment bankers design and lay out equity research? 

Investment bankers work closely with equity research analysts to design and layout equity research reports.

• They aim to create a visually appealing and easily digestible document that presents the research findings effectively.
• This involves organizing the content logically, using charts and graphs to illustrate key points, and ensuring the report aligns with the firm’s branding guidelines to enhance its professionalism and readability.

Why should Equity Research Analysts care about Equity Research?

Now, let’s shift our focus to the equity researchers and why this matters for you and your clients.

Think of yourself as the tour guide for your clients on their financial planning journey. 

Just like planning a cross-country road trip, would you lead your clients down unfamiliar paths without checking the map, weather forecast, or road conditions? Probably not.

Your clients entrust you with their hard-earned money, their financial dreams, and aspirations. They rely on your expertise to navigate the complex terrain of the financial world. 

Equity research equips you with the tools to make informed decisions, choose the right investment destinations, know when to accelerate or hit the brakes, and steer clear of financial storms. 

It is about safeguarding their financial future so they are not left vulnerable to the unpredictable winds of the market.

By conducting thorough equity research, you empower yourself to be the best possible guide for your clients, helping them navigate the intricate landscape of investments with confidence and precision. 

It is not just about your success; it’s about securing theirs.

Let’s now talk about how to set up your company management and industry research report foundation in Equity Research.

Foundation to Effective Equity Research 

Before you explore headfirst into the world of equity research, ensure you have got the essentials in place.

1. Financial literacy

Before you even think about analyzing stocks or assessing market trends, you must have a solid grasp of financial concepts.

It is like learning the rules of the road before you start driving. You would not have navigate unfamiliar roads without understanding traffic signs, right? 

Similarly, financial literacy is your roadmap through the world of numbers, financial statements, and economic indicators.

2. Data sources

In the digital age, data is gold. Equity research relies heavily on accurate, up-to-date information, and there are numerous sources at your disposal:

• Financial statements: A top company management’s financial reports reveal its past, present, and potential future. Learning how to interpret income statements, balance sheets , and cash flow statements is fundamental.

Market data: Stock exchanges provide real-time data on stock prices, trading volumes, and more. Websites, financial analysts, news outlets, and specialized software are also valuable sources.

Economic indicators: Keeping an eye on broader economic indicators, like GDP growth, inflation rates, and unemployment figures, can give you insights into the overall market direction.

3. Defining investment goals and risk tolerance

Ask yourself:

What are your financial objectives? 

Are you aiming for long-term wealth accumulation, retirement planning, or short-term gains?

How much risk are you willing to take? 

By setting clear goals and understanding your risk tolerance, you’re essentially choosing your financial destination and the path you will take to get there.

So, now that you have learned the essentials let me take you through the Equity Research Report and Framework, where you will learn about the tools and strategies to navigate the world of stocks, analyze companies, and make informed investment decisions.

Equity Research Report

An equity research report is a detailed document prepared by equity research analysts.

Equity reports provide an in-depth analysis of a specific stock or company’s share price move, typically for the purpose of investment decision-making.

Information: It offers comprehensive data and insights into a company’s financial health , industry trends, and competitive positioning.

Investment recommendations: Analysts often buy, sell, or hold recommendations based on their analysis, aiding investors in making informed choices.

Risk assessment: This helps investors assess the risks associated with a particular investment, including factors like volatility and market conditions.

Transparency: Promotes transparency in financial markets by sharing research findings with investors, enabling them to understand the basis for investment decisions.

Market insights: Provides valuable market insights and can influence market sentiment and trading activity.

Regulatory compliance: In some cases, equity research reports are required by regulatory bodies to ensure fair and accurate information dissemination.

Investor confidence: Builds investor confidence by offering credible and expert analysis, which can attract potential investors.

Overall, equity research reports serve as a critical tool for investors, financial institutions, and the broader market to make informed investment decisions and manage risk.

Common Pitfalls to Avoid in Equity Research

While equity research can be highly rewarding, it is essential to steer clear of common pitfalls that can hinder your success. 

Here are some pitfalls to watch out for and guidance on avoiding them:

1. Overconfidence bias

Pitfall: Overestimating your abilities and underestimating the risks involved.

Guidance: Stay humble and recognize that the financial markets are complex and unpredictable. Seek diverse perspectives and continuously educate yourself.

2. Neglecting qualitative factors

Pitfall: Focusing solely on numbers and ignoring qualitative aspects like asset management , quality, and industry trends.

Guidance: Incorporate qualitative analysis and industry research into your research. 

Assess top company management’s leadership, financial model, competitive positioning, financial models, and the firm’s investment in asset managers and the broader industry landscape.

3. Confirmation bias

Pitfall: Seeking information that confirms pre-existing beliefs and ignoring contradictory evidence.

Guidance: Be open to challenging your assumptions. Encourage dissenting opinions in your research process to avoid confirmation bias.

4. Overlooking risk assessment

Pitfall: Neglecting to thoroughly assess and manage risks in your portfolio.

Guidance: Prioritize risk assessment. Understand the risks associated with each investment and develop strategies to mitigate them.

5. Herd mentality

Pitfall: Blindly following the crowd or popular investment trends.

Guidance: Conduct independent research and base your decisions on your analysis rather than market sentiment. Herd behavior can lead to bubbles and market crashes.

6. Lack of diversification

Pitfall: Concentrating your investments in a single stock or industry exposes your portfolio to higher risk.

Guidance: Diversify your investments across different asset classes and industries to spread risk and enhance portfolio stability.

7. Short-term focus

Pitfall: Chasing short-term gains and interest income while neglecting long-term investment strategies.

Guidance: Stay committed to your long-term investment goals and avoid making impulsive decisions based on short-term market fluctuations.

By being aware of these common pitfalls and following the guidance provided, you can navigate the world of equity research with greater confidence and increase your chances of making informed and successful investment decisions.

Frequently Asked Questions

How can i gain practical experience in equity research.

You can start by seeking internships with financial institutions or research firms that offer hands-on experience in corporate finance or equity research. 

You can network with professionals in the field, attend industry events, join finance-related clubs or organizations, and connect with alumni for guidance and opportunities. 

Consider participating in stock pitch competitions or managing a personal investment portfolio to develop your skills further.

What are some of the common challenges equity research analysts face, and how can I overcome them?

Common challenges for both equity analysts and research analysts include dealing with information overload, maintaining objectivity, and staying updated with rapidly changing market conditions. 

To overcome these challenges:

Focus on developing efficient research processes that help you filter relevant information.

Equity research analysts meet the management of the companies they cover so as to get the most timely information in order to update their earnings estimates and reports.

Regularly review and adjust your own investment thesis or theses, and seek input from colleagues to gain different perspectives, which can enhance your analysis and objectivity.

My Exclusive Insights for You

Congratulations! you have now come to the end of this guide on how to do equity research. 

Let’s recap the crucial lessons that can fuel your journey to becoming a proficient private equity analyst and researcher:

Start with a strong foundation of financial literacy to make a mark in the investment banking business.

The choices you make in selecting stocks, defining goals, and assessing risks are at the heart of your equity research journey. 

Equity research is a blend of quantitative and qualitative analysis, including understanding markets, industries, management quality, and more.

Stay hungry for knowledge, embrace continuous learning, and adapt to new technologies, market trends, and investment strategies.

Now, the most important step is to apply what you have learned. Take action! 

Avadhut is the Founder of FinanceWalk. He enjoys writing on Finance Careers topics. Check our Financial Modeling Courses . Contact us for  Career Coaching based on Your Inner GPS.

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Equity Research Analyst Job Description Template

An equity researcher analyzes and provides financial insights on publicly-traded companies and/or sectors to facilitate investment decisions within fund allocations.

Trusted by leading brands and startups

The role of the researcher can be sell-side or buy-side. The former refers to analysts that are in a bank, or a broker, who offer paid research to institutional investors with a view to solicit the provision of further financial services. The latter will be analysts working directly within investment funds that generate investment ideas and strategies for its fund managers.

As the name suggests, this is a role traditionally applied to the equity class of assets. However similar research roles do exist within the commodity and fixed income space. The job description below can be tweaked to apply to such roles.

One quirk of equity research is that an analyst is not an entry-level position, as is a common title in other banking roles. An associate is actually the most junior position within the team and acts as an assistant to the analyst, who will have their name directly attributed to the published research reports.

Equity Research Analyst - Job Description and Ad Template

Copy this template, and modify it as your own:

Company Introduction

{{Write a short and catchy paragraph about your company. Provide information about the company’s culture, perks, and benefits. Mention office hours, remote working possibilities, and anything else that makes your company interesting. Also frame where the team and role fits into the organisational structure, as research teams can have different coverage hierarchies.}}

Job Description: Sell-Side Equity Research

The Equity Research department provides independent and objective investment research to the global investment community. It collects and analyzes financial information for stocks within {{list coverage sectors}} . Analysts within this team use this data to build financial models to explore future scenarios of the stocks on a company and wider macroeconomic level.

The ideal candidate will combine a strong quantitative skill set with a range of qualitative skills in order to effectively communicate their research in writing and verbally to clients. In addition, we seek someone with the highest level of ethical integrity.

Responsibilities

Create and maintain earnings, valuation, and industrial models for {{allocated number of stocks, or the name of the industry to be covered}} .

Analyze data to identify emerging opportunities and risks, justifying your reasoning.

Provide BUY/SELL/HOLD recommendations and present findings to the investment committee.

Assist in writing research reports with your findings, to be published to the community and media.

Interact with institutional investors, communicating investment research and responding to requests for models and ad-hoc analysis.

Maintain constant coverage of industry-related news, trends, and developments. Disseminate your insight when appropriate to internal and external stakeholders.

Build relationships with investor relations teams of your portfolio companies. This will involve {{domestic and/or international}} travel.

Devise and perform your own primary research methods, keeping abreast of trends and sentiment in the market.

Liaise with internal sales and trading teams for responding to news, corporate action, and reporting events. You will be expected to maintain a procedure protocol for escalating emerging news.

Maintain a public image for the firm at conferences/events. Communicate the company’s research, building its brand and referring potential new clients.

{{Add other relevant responsibilities here}}

Skills and Qualifications

Bachelor’s degree in finance, economics, financial engineering, statistics, or econometrics

Profound understanding of equity markets on a global level. In addition, a deep understanding of fundamental analysis, financial modeling, asset allocation, and strategy research

Prior experience in financial services (2-4 years) within a “front office” role {{such as M&A, ECM, DCM, Sales & Trading or Equity Research}}

Advanced Excel proficiency. 3+ years of practical experience of using Excel for building and maintaining financial models

Platform experience within Bloomberg and {{one or more of: Morningstar Direct, Informa PSN, Facstet, Axioma, or Barra AEGIS}}

Excellent written and verbal communication skills. Proficiency for presenting and debating a point under pressure

CFA is a plus

{{Foreign languages desirable for roles in Europe or Asia}}

Series 7 and 86/87 license is a plus. Unlicensed candidates will be sponsored, but expected to complete accreditation within a short timeframe

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Hire a top equity research analyst now.

Toptal is a marketplace for top equity research analysts. Top companies and startups hire Equity Research freelancers from Toptal for their mission-critical projects.

Andy Vietor

Andy was recognized twice as an All-Star Analyst by the Wall Street Journal. He has been a strategist, operating executive, financier, and top-ranked industry analyst. As a freelancer, Andy advises a range of companies—from early-stage and middle-market to large caps—delivering customized solutions including effective investor presentations, dynamic financial models, and project finance structuring.

Yiannis Ritsios, CFA

Yiannis is an experienced investment professional who manages assets for institutional investors globally and has extensive experience in financial analysis, valuation, equity research, and investment management. He has worked on M&A projects for large corporations and startup funding for the European Commission. With an MBA from Imperial College London, Yiannis began freelancing to help top management, investors, and entrepreneurs create value and sustainable growth.

Thomas Robb

Thomas delivered actionable solutions and insights to multi-billion dollar clients across the tech and software industries as a senior equity research associate at Morgan Stanley. As an entrepreneur, he understands the importance of taking extreme ownership of projects and enjoys working with executives to grow their businesses through financial modeling, competitive market analysis, and creative problem-solving.

Discover More Equity Research Analysts in the Toptal Network

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What do you actually do in equity research.

If you're interested in breaking into finance, check out our Private Equity Course  and Investment Banking Course , which help thousands of candidates land top jobs every year.

Equity Research

The specific responsibilities of an equity research analyst can vary quite a lot on a day-to-day basis but still follow a predictable pattern over the course of a quarter. Let's look at what the typical day of someone in equity research looks like.

Broadly speaking, the pace of work you’ll be doing outside of earnings season is slower than the sprint associated with publishing reports during earnings. Let’s start with a normal day outside of earnings first.

Earnings season refers to one of four periods in a year when companies you cover report their results for the most recent quarter.

If you're interested in breaking into equity research, check out our course , which will teach you all of the modeling, valuation, stock pitching, and recruiting strategy you need to get the job.

Outside of Earnings Season

Equity research analysts typically start their day around 7 AM. At most investment banks, that’s around the time when the Morning Call is held, which is where equity research analysts present their most recent actionable reports and trade ideas to the sales team.

As the sales team is generally one of the first points of contact between clients and a new piece of research, they ask the presenting equity research analysts questions to refine their own understanding of the pitch by anticipating what their clients might later ask them.

Attending the morning call is optional, though senior analysts aim to make many appearances throughout the year to broaden their reach. As a junior, you’re likely going to attend to learn from other presenters or to help answer some questions that you're better equipped to handle. On occasion, you might be asked to speak as well.

Keeping Up with News

After the morning call, you’ll spend a large portion of your day keeping up with news and events relevant to coverage.

As a new hire, you’ll spend a considerable amount of time after hitting the desk ramping up on your coverage by reading news and industry reports. You’ll need to have an understanding of overall economic trends and market developments to the extent that they impact the stocks you cover, whether directly or tangentially.

More seasoned employees still spend a lot of time finding insightful news to stay current and continue to refine their views.

Generally, you’re going to get hundreds of emails a day based on alerts you’ve set up to capture any announcements which could be impactful for your coverage, so expect to spend a good amount of time sifting through those to see what matters.

Publishing Reports

These are the most common types of reports you’ll create outside of earnings season:

Company Initiations – Equity research teams publish Initiation of Coverage reports when they assume coverage of a new stock. These reports establish the team’s initial rating and views on a company and include detailed information on its business model, competitive landscape, and key financial metrics. From the reader's perspective, they’re a great source of information for someone who’s starting to learn about a company or industry.

Rating Changes – Published to revise a team's rating on a stock. These reports often have a significant impact on a stock's price especially when the publishing team is well-followed by investors and the broader media. These reports include the rationale behind the rating change and a new price target when applicable.

Price Target Revisions / Model Updates – Issued when a team changes the valuation methodology used to value a stock, or alongside publishing a model update which changes the financial metric inputs into an existing valuation framework. These reports also tend to be stock-moving, depending on the influence of the analyst team.

Thematic Reports / Industry Updates – These reports focus on broad themes specific to an equity research team’s coverage. They are normally longer-term projects that are worked on over several weeks or longer.

Interacting with Clients

Throughout the day, you’ll speak with the sales team to set up calls with clients they manage. You’ll also be expected to keep the trading team updated on certain stock-moving news, especially as traders are spread too thin to keep track of relevant news across all the stocks they trade.

Both sales and trading can be thought of as another client to equity research, as the same rules which govern interactions between outside clients and equity research also apply to anyone outside of the equity research department within an investment bank.

You'll speak with many types of clients on the job which exposes you to different investing styles and stock theses.

What Kinds of Requests Do You Get from Clients?

Data / Industry Model Requests – Equity research analysts often get requests for the large datasets of industry-specific metrics they maintain. Clients often ask for these datasets to use in their own analysis or models and ask equity research to help them interpret any trends.

Company Model Requests – These requests come from clients who want to compare their predictions with your team’s. They also typically ask questions about specific assumptions in your model, such as why you might be forecasting 3Q23 revenue growth that’s 200 basis points higher than management’s most recent guidance, for example.

Industry Calls – Industry calls are requested by investors who are new to the space or by those who have recently picked up coverage of a stock in your coverage. You typically discuss overall market trends, your future expectations, and the nuances of analyzing the industry from your perspective.

Specific Company Calls – These calls happen when a client wants to learn more about your view of a particular company. You would discuss your rating on the stock, talk about recent price movements, and answer questions about potential risks to your view (i.e., what would it take to change your rating on the stock?).

During Earnings Season

Earnings season is the time when publicly traded companies release their quarterly financial reports. These reports give equity research analysts actual data to which they can compare their prior estimates, and provide a new set of data points to inform forecasts for future periods.

Earnings season happens four times a year. It's usually a really hectic time for equity research analysts due to the speed at which they have to synthesize a lot of new information to publish reports.

Responsibilities During Earnings Season

Earnings Previews – During the days leading up to a company reporting its earnings, you’ll write an earnings preview note which gives investors an idea of what to expect from the upcoming release. These notes can be used to reiterate an equity research team's views, or as a final opportunity to change estimates reflecting any new information they may have gathered before an earnings release.

Set Up the Model – The day before an earnings release, equity research juniors set up the models for upcoming releases by building and formatting a variance table , which just shows how actual reported results differed from the analyst’s expectations, consensus estimates, and any previous management guidance.

Write a First Take Note – In the U.S., core stock market hours are from 9:30 AM to 4:00 PM on weekdays. Companies release their financials either before the market opens (generally around 7 AM, or sometimes earlier) or after the close, typically around 4:30 PM .

When results hit, you’ll have ~30 minutes to analyze the financials and publish what’s known as a “first take” note. While there's a lot of stress that comes with writing, proofreading, and publishing a note in such a short time frame, these notes are generally pretty simple. They include high-level takeaways from a company’s earnings results and include a variance table.

Get On the Earnings Call - After an earnings release, a company’s management hosts an earnings call where they discuss the results of the previous quarter, issue guidance, and answer questions from the equity research analyst community.

As a junior, you’ll be using this time to update the model based on any new insight you can gather from the call, and take copious notes which you’ll use to write a final note to wrap up that company’s earnings season. Your senior analyst will be using that time to come up with engaging and insightful questions to ask the management team on the call. You’re likely to do some of this part of the job too, even at the junior level.

Update the Model and Publish a Final Takeaways Note – Finally, you’ll write a key takeaways note to summarize the company’s earnings release and management call, and highlight any changes to your modeling or investment thesis. These notes generally include price target revisions, and upgrades or downgrades to the overall rating when warranted.

Overall, the responsibilities of an equity research analyst can vary quite a lot on a day-to-day basis but still follow a predictable pattern over the course of a quarter. The main responsibilities include keeping up with relevant news and events to inform your views around a group of stocks or industries, which are shared with clients through research reports and live interactions.

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The Value of Equity Research

Equity research is an invaluable asset for anyone looking to stay up-to-date on market and industry trends. In this guide, you will learn about the type of information contained in equity research, the value it offers to corporate professionals, and how the most advanced teams are already leveraging the expertise of Wall Street’s top analysts to inform critical business decisions.

Get the guide

Introduction.

Equity research, which forms a multi-billion dollar industry for investment banks, is produced by thousands of analysts worldwide to provide the market with valuable information on companies, industries, and market trends. Today, over 90% of equity research is consumed by fund managers, who have the Wall Street relationships to acquire it and the analyst resources to mine it for insights. For corporate strategy professionals who lack this access, however, equity research has historically been challenging to obtain and navigate.

To help corporations circumvent these challenges, AlphaSense has introduced Wall Street Insights, the first and only equity research collection purpose-built for the corporate user. Through the AlphaSense platform, any business making strategic plans or product decisions, conducting competitive analysis, evaluating M&A, or engaging in investor relations can now tap into the deep industry expertise of Wall Street’s top analysts.

What is Equity Research?

Equity research is developed by sell-side firms to help investors and hedge fund managers discover market opportunities and make informed investment decisions. Increasingly, this expert analysis has also been identified by forward-looking corporations as a highly valuable tool to inform strategic decision-making.

There are thousands of sell-side firms that employ expert analysts around the globe to write equity research for the market. The majority of firms producing equity research are hyper-focused and only have one or two analysts developing reports on a specific industry. However, larger firms, such as Morgan Stanley and Bank of America, collectively employ thousands of analysts to write reports on thousands of public companies–covering everything from TMT giants to niche products.

Equity research analysts are deep subject matter experts who are often former executives, industry veterans, or academics. These analysts conduct in-depth research and publish reports on corporations, industries, and macro trends, offering an expert lens into a subject.

Historically, over 90% of equity research was consumed by buy-side fund managers, who had the Wall Street relationships to acquire it and the analyst resources to mine it for insights. For buy-side professionals, equity research is a critical tool to inform sound investment decisions backed by expert insights.

Today, equity research is increasingly relied upon by corporate teams as a high-value source of information. These teams leverage equity research to make strategic business plans, conduct competitive analysis, evaluate mergers and acquisitions, and make product and marketing decisions. For corporations, the value of equity research lies in the detailed coverage of their company, their competitors, and how they are performing related to the marketplace they are within.

What is an Equity Research Report?

An equity research report is a document prepared by an equity research analyst that often provides insight on whether investors should buy, hold, or sell shares of a public company. In an equity research report, an analyst lays out their recommendation, target price, investment thesis, valuation, and risks.

There are multiple forms of equity research, including (but not limited to):

An update report that highlights the latest news, company announcements, earnings reports, Buy Sell Hold ratings, M&A activity, anything that impacts the value of the company.

A comprehensive company report that is compiled when an analyst or firm initiates their coverage of a stock. Initiation reports cover all of the divisions and products of a company in-depth to provide a baseline of what the company is and how it is performing. Initiation reports can be tens to hundreds of pages long, depending on the complexity of a company.

General industry updates that cover a group of similar companies within a sector. Industry-specific reports typically dive into additional factors such as loan growth, interest rates, interest income, net income, and regulatory capital.

A report compiled by research firms either daily or weekly. These reports can often be a great place to get more in-depth insight on commodities and also get market opinions from commodity analysts or traders who write the reports.

A quick 1-2 page report that comments on a news release from a company or other quick information

What is Included in a Typical Equity Research Report?

Research reports don’t need to follow a specific formula. Analysts at different investment banks have some latitude in determining the look and feel of their reports. But more often than not, research reports follow a certain protocol of what investors expect them to look like.

A typical equity research report includes in-depth industry research, management analysis, financial histories, trends, forecasting, valuations, and recommendations for investors. Sometimes called broker research reports or investment research reports, equity research reports are designed to provide a comprehensive snapshot that investors or corporate leaders can leverage to make informed decisions.

Here’s a quick overview of what a standard equity research report covers:

This section covers events, such as quarterly results, guidance, and general company updates.

Upgrades/Downgrades are positive or negative changes in an analyst’s outlook of a particular stock valuation. These updates are usually triggered by qualitative and quantitative analysis that contributes to an increase or decrease in the financial valuation of that security.

Estimates are detailed projections of what a company will earn over the next several years. Valuations of those earnings estimates form price targets. The price target is based on assumptions about the asset’s future supply & demand and fundamentals.

Management Overview and Commentary helps potential investors understand the quality and makeup of a company’s management team. This section can also include a history of leadership within the company and their record with capital allocation, ESG, compensation, incentives, stock ownership. Plus, an overview of the company’s board of directors.

This section covers competitors, industry trends, and a company’s standing among its sector. Industry research includes everything from politics to economics, social trends, technological innovation, and more.

Historical Financial Results typically cover the history of a company’s stock, plus expectations based on the current market and events surrounding it. To determine if a company is at or above market expectations, Analysts must deeply understand the history of a specific industry and find patterns or trends to support their recommendations.

Based on the market analysis, historical financial results, etc., an analyst will run equity valuation models. In some cases, analysts will run more than one valuation model to determine the worth of company stock or asset.

Absolute valuation models : calculates a company’s or asset’s inherent value.

Relative equity valuation models : calculates a company’s or asset’s value relative to another company or asset. Relative valuations base their numbers on price/sales, price/earnings, price/cash flow.

An equity research analyst’s recommendation to buy, hold, or sell. The analyst also will have a target price that tells investors where they expect the stock to be in a year’s time.

What Does an Equity Research Analyst Do?

Equity research analysts exist on both the buy-side and the sell-side of the financial services market. Although these roles differ, both buy-side and sell-side analysts produce reports, projections, and recommendations for specific companies and stocks.

An equity research analyst specializes in a group of companies in a particular industry or country to develop high-level expertise and produce accurate projects and recommendations. Since ER analysts generally focus on a small set of stocks (5-20), they become specialists in those specific companies and industries that they evaluate or follow. These analysts monitor market data and news reports and speak to contacts within the companies/industries they study to update their research daily.

Analysts need to comprehend everything about their ‘coverage’ to give investment endorsements. Equity research analysts must be conversant with the business regulations and regime policies within the country to decide how it will affect the market environment and business in general. The more you understand the industries in detail, the easier it will be for you to decipher market dynamics.

One prevalent aspect of an equity research analyst’s job is building and maintaining valuable relationships with corporate leaders, clients, and peers. Equity research is largely about an analyst’s ability to service clients and provide insightful ideas that positively influence their investing strategy.

EQUITY RESEARCH ANALYSTS:

• Analyze stocks to help portfolio managers make better-informed investment decisions.
• Analyze a stock against market activity to predict a stock’s outlook.
• Develop investment models and provide trading strategies.
• Provide expertise on markets and industries based on their competitive analysis, business analysis, and market research.
• Use data to model and measure the financial risk associated with particular investment decisions.
• Understand the details of various markets to compare a company’s and sector’s stock

Buy-Side vs. Sell-Side Analysts

Although the roles of buy-side and sell-side analysts do overlap in some respects, the purpose of their research differs.

How Do Corporates Currently Access Equity Research?

If you were to Google “equity research reports,” you would not get access to equity research, earnings call transcripts or trade journals. You would, however, discover an unmanageable amount of noise to sift through.

Accessing equity research reports is highly dependent on relationships and entitlements, particularly for corporate teams. Unlike financial firms and investor relations teams, who can access equity research by procuring the right entitlements, corporate teams have a much harder time finding and purchasing high-quality equity research.

If you were to search online for equity research, for example, you would be presented with sub-par options such as:

Some websites allow you to search for research reports on companies or by firms. Some of the reports are free, but you must pay for most of them. Prices range from just $15 to thousands of dollars.

If you want just the bottom-line recommendations from analysts, many sites summarize the data. Nearly all the websites that provide stock quotes also compile analyst recommendations, however, you will only get the big picture and not any of the detailed analysis.

Some independent research providers sell their reports directly to investors. These reports typically include an overview of what a stock’s price could be, plus an analysis of the company’s earnings. These reports often cost less than $100 but can be more.

The majority of equity research is completely unsearchable, which is why AlphaSense’s Wall Street Insights is changing the game for corporations globally. Now, with WSI, corporations can leverage this high-quality research to augment their understanding of specific companies and industries; plus, AlphaSense’s corporate clients can now conduct more meaningful analysis and make more data-driven decisions.

Real-Time Research : Real-Time research is available to eligible users (based on an entitlement) immediately upon publication by the broker. Financial Services users with entitlements are the primary consumers of real-time research, while some Corporate professionals are also eligible. Payment for real-time research is made directly from clients to brokers through trading commissions or hard dollar agreements.

Aftermarket Research : Aftermarket research is a collection of many of the same documents as the real-time collection, but it is available after a zero to fifteen-day delay. Investment bankers, consultants, and corporate users are the primary consumers of Aftermarket research.

What is Wall Street Insights?

Wall Street Insights is the first and only equity research collection purpose-built for the corporate market, providing corporations unprecedented access to a deep pool of equity research reports from thousands of expert analysts.

Through partnerships with Morgan Stanley, Bank of America, Barclays, Bernstein, Bernstein Autonomous, Cowen, Deutsche Bank, Evercore ISI, HSBC, and others, corporate professionals can now access the world’s most revered equity research, indexed and searchable in the AlphaSense platform.

From macro market trends and industry analyses to company deep-dives, the Wall Street Insights content collection provides corporate professionals with a 360-degree view of every market. With the valuable expertise of thousands of analysts on your side, corporate teams can quickly compare insights, validate internal assumptions, and generate new ideas to guide critical business decisions and strategies.

In terms of search and accessibility, Wall Street Insights is the first of its kind. Not only does AlphaSense offer hard-to-find equity research reports, but we also provide a robust and seamless search experience.

What Research Do You Get Access to with WSI?

Get access to the world’s leading equity research with Wall Street Insights. Download the e-book to learn more about equity research from Morgan Stanley, Barclays, Bernstein, Deutsche Bank, and more.

“We are delighted to partner with AlphaSense to expand access to Morgan Stanley’s global research platform,” says Simon Bound, Global Head of Research at Morgan Stanley. We have over 600 publishing analysts covering companies, industries, commodities, and macroeconomic developments across more than 50 countries. Morgan Stanley will bring corporates a unique perspective from our best in class analysts, a global platform, and a collaborative culture that enables us to unravel the most complex market and industry trends.”

How Can Companies Leverage Equity Research?

Discover how the world’s most innovative companies leverage Wall Street Insights to make critical business decisions every day. Download the e-book to read real case studies from a Corporate Development team and a Corporate Strategy team.

“AlphaSense’s corporate users are typically Corporate Strategy, Corporate Development, and Investor Relations professionals. Today, thousands of enterprises rely on equity research to power data-driven decision making. These teams leverage equity research reports to:”

• Create investment ideas
• Monitor peers in real-time (and discover what equity research is being produced about them)
• Model and evaluate companies (for M&A or general benchmarking)
• Dive deep into customers, partners, and prospects
• Get up-to-speed quickly on specific industry trends
• Prepare for earnings season

Ready to explore the world’s leading equity research

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Equity Research

Investment banking, key differences, special considerations, the bottom line.

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• 5 Forex Careers for Financial Professionals

Equity Research vs. Investment Banking: An Overview

Investment banking may no longer be the undisputed first choice for the best and brightest. Instead of streaming into investment banking , many top graduates are now opting for careers in management consulting, technology, or launching their own startups. While the allure of investment banking may have dimmed, due to long hours and a stressful work environment, the industry still attracts many workers. Equity research is also another destination for prospective financial employees.

Equity research is sometimes viewed as the unglamorous, lower-paid cousin of investment banking. The reality, though, differs from this widely held perception. In order to help you formulate your own opinion, here's a head-to-head comparison of equity research (sell-side research that is conducted by the research departments of broker-dealers) and investment banking in 10 key areas.

Key Takeaways

• A career in finance can take many paths, including investment banking and equity research.
• Investment bankers work on M&A deals and issue new securities to the market.
• Equity researchers conduct thorough analysis and research of companies and their share price to issue investment recommendations.
• Each role has different responsibilities and hours, which will suit prospective candidates differently.
• The pay for investment bankers is a bit higher in the early career stage, especially when bonuses are included, and this gap further widens over the course of a career.

Equity researchers analyze stocks to help portfolio managers make better-informed investment decisions. Equity researchers employ problem-solving skills, data interpretation, and various other tools to understand and predict a given security’s behavioral outlook.

This often involves quantitatively analyzing a stock’s statistical data in relation to recent market activity. Finally, equity researchers may be tasked with developing investment models and screening tools that identify trading strategies that help  manage portfolio risk .

Equity researchers are responsible for identifying patterns with current market price changes and using this information to create algorithms that identify profitable stock investment opportunities. The equity researcher should be able to understand the idiosyncratic differences between various international markets in order to cross-compare domestic and foreign stocks.

The low end of the salary range is $52,000, while the high end sits at $147,000. The average salary is over 93,000 as of 2024. Private equity firms and other financial services companies are the chief employers of equity researchers. The majority of these jobs are based in New York City, although firms are increasingly offering positions in major metropolitan hubs like Chicago, Boston, and San Francisco.

Investment banking is a specific division of banking related to the raising of capital for other companies, governments, and other entities. Investment banks underwrite new debt and equity securities for all types of corporations; aid in the sale of securities; and help to facilitate  mergers and acquisitions , reorganizations, and broker trades for both institutions and private investors.

Investment banks also provide guidance to issuers regarding the issue and placement of stock. Investment banking positions can include elements of consulting, banking, capital market analysis,  research , trading, and much more. Each requires a specific skills to be developed.

A degree in finance, economics, accounting, or mathematics is a good start for an investment banking career. However, most investment banking jobs focus their recruiting on elite universities.

Those interested in investment banking should strongly consider pursuing a  Master of Business Administration  (MBA) or other professional qualifications.

Great people skills are a huge positive in any investment banking position. Even dedicated research analysts spend a lot of time working as part of a team or consulting with clients. Some positions require more of a sales touch than others, but comfort in a professional social environment is key. Other important skills include communication skills (explaining concepts to clients or other departments) and a high degree of initiative.

1. Work-Life Balance

Equity research is the clear winner here. Although 12-hour days on weekdays are the norm for equity research associates and analysts, there are at least phases of relative calm. The busiest times include initiating coverage on a sector or specific stock, and earnings season when corporate earnings reports have to be analyzed rapidly.

The hours in investment banking are almost always brutal, with 60-80 hours per week being a baseline for investment banking analysts (the lowest on the totem pole). During busy times, work weeks can be up to 100 hours or more.

There has been a growing backlash against the atrocious hours demanded by investment banking analysts. In response, Goldman Sachs has enacted a rule guaranteeing that bankers will not have to work between 9 p.m. Friday and 9 a.m. on Sunday. These restrictions may do little to change the "work hard, play hard" culture of investment banking.

The most common complaint of those who have quit investment banking is that the total lack of work-life balance leads to burnout. That complaint is seldom heard from those employed in equity research.

Major financial jobs tend to be concentrated in major financial hubs such as New York, Chicago, London, and Hong Kong. This is no different for equity research analysts and especially investment bankers, many of whom are paid to relocate to their firm's home city.

2. Visibility

Equity research is the winner in this area as well. Associates and junior analysts often receive recognition for their work by being named on research reports that are distributed to a firm's sales force, clients, and media outlets.

Since senior analysts are recognized experts on the companies they cover in a sector, they are sought after by the media for comments on these companies after they report earnings or announce a material development.

Investment bankers, on the other hand, toil in relative obscurity at the junior level; however, their visibility increases significantly as they climb the investment banking ladder, especially if they are part of a team that works on large, prestigious deals.

3. Advancement

Investment banking wins in this area. There is a clear path with defined time frames for career progression in investment banking. This begins with the analyst position (two to three years), then transitions to an associate position (three-plus years), after which one is in line to become a vice president and eventually director or managing director.

The career path in equity research is less clearly defined but generally goes as follows—associate, analyst, senior analyst, and, finally, vice president or director of research. Within the firm, however, investment bankers probably have better prospects for reaching the very top, since they are deal makers and manage relationships with the firm's biggest clients.

Research analysts, on the other hand, might be viewed as number crunchers who do not have the same ability to bring in big business.

4. Job Functions

Investment banking probably wins here as well, albeit only over the longer term. Equity research associates start off by doing a lot of financial modeling and analysis under the supervision of the analyst who is responsible for the coverage of a specific sector or group of companies.

Also, associates also communicate to a limited extent with buy-side clients, top management of the companies under coverage, and the firm's traders and salespeople. Over time, their responsibilities evolve to less financial modeling and a greater degree of report writing and formulating investment opinions and theses; however, there isn't a great deal of variability in the job functions of associates and analysts. What varies is the relative time spent on these functions.

Investment bankers, on the other hand, spend the first few years of their careers immersed in financial modeling, comparative analysis, and preparing presentations and pitchbooks . But as they climb the ladder, they get the opportunity to work on exciting deals such as mergers and acquisitions or initial public offerings.

Research analysts only get this opportunity occasionally, when they are brought "over the wall" (the "wall" refers to the mandatory separation between investment banking and research) to assist on a specific deal involving a company that they know inside out.

5. Education and Designations

A bachelor's degree is a must for any aspiring equity research analyst or investment banking associate. Common areas of study include economics, accounting, finance, engineering, computer science, mathematics, or even physics. While it is possible to get hired with just a bachelor's degree, further qualifications can be used to get hired. They are also great for furthering one's career.

The difference between an equity researcher and an investment banker is determined by what post-graduate credentials are usually obtained. Most equity researchers earn a Chartered Financial Analyst (CFA) designation and most investment bankers get a Master of Business Administration (MBA) degree.

The CFA, widely regarded as the gold standard for security analysis, has become almost mandatory for anyone wishing to pursue a career in equity research. But while the CFA can be completed at a fraction of the cost of an MBA program, it is an arduous program that needs a great deal of commitment over many years. Being a self-study program, the CFA does not provide an instant professional network as an MBA class does.

The MBA curriculum, by virtue of being more business-oriented and less investment-oriented than the CFA, makes it more suitable for the investment banking profession; however, the competition to get into the best business schools—which is where most Wall Street firms hire their associates—is intense. Many aspiring investment bankers enter into some other financial field, perhaps working as analysts or advisors, and work toward their MBA.

Investment Bankers are required to pass the FINRA Series 79 Investment Banking Representative Exam.

6. Skill Sets

Both jobs require a great deal of analytical and mathematical/technical skills, but this especially applies to equity research analysts. These analysts need to be able to perform complex calculations, run predictive models, and prepare financial statements with quick turnarounds.

As noted earlier, financial modeling and in-depth analysis are common to both investment bankers and research analysts in the earlier stages of their careers. Later on, the skill sets diverge, with investment bankers required to be adept at closing deals, handling large transactions, and managing client relationships.

Research analysts, on the other hand, need to be effective at both verbal and written communication and have the ability to make balanced decisions based on rigorous analysis and due diligence .

7. External Opportunities

Successful research analysts and investment bankers generally have no shortage of external opportunities because of their experience, knowledge, and skills. Research analysts are likely to gravitate toward the buy-side (i.e., money managers, hedge funds, and pension funds), while seasoned investment bankers usually join private equity or venture capital firms.

8. Barriers to Entry

Both investment banking and equity research are difficult areas to get into, but barriers to entry may be slightly lower for equity research. Investment banking tends to draw more applications, due to prestige and higher pay.

9. Conflicts of Interest

Although investment bankers and research analysts both have to steer clear of conflicts of interest , this is a bigger issue in equity research than in investment banking. This was highlighted by the U.S. Securities and Exchange Commission's (SEC)  enforcement actions against 10 leading Wall Street firms in 2003, relating to analyst conflicts during the telecom/dot-com boom and bust of the late 1990s and early 2000s.

Under the settlement, the firms paid disgorgement and civil penalties totaling $875 million, among the highest ever imposed in civil securities enforcement actions. The 10 firms also had to agree to undertake a host of structural reforms designed to completely separate their research and investment banking arms.

10. Compensation

Both investment banking and equity research are well-paid professions, but over time, investment banking is a much more lucrative career choice.

Investment bankers are famous for their high pay and large signing bonuses. According to the online finance community "Wall Street Oasis," summer interns earn the equivalent on a pro-rata basis of around $77,000, plus a signing bonus of around $6,000 . First-year analysts earn an average salary of $80,239 in 2024, plus bonuses, according to PayScale.

Total compensation will vary greatly depending on job location, company, and the employee's performance review.

The real moneymakers, however, are investment banking associates, who earn between $150,000 and $200,000, with a 50% to 100% bonus. It is not unusual for total compensation for a senior vice president or managing director to exceed $400,000 annually.

The average equity research analyst earns over $93,000 in annual compensation in 2024, according to PayScale, plus a bonus. While it's higher than investment banking analysts starting out, this profession doesn't typically see the same magnitude of bonuses or salary growth as the career progresses. Research analysts indirectly generate revenues through sales and trading activities that are based on their recommendations.

The reputation of a firm's research department may be a significant factor in swaying a company's decision when selecting an underwriter when it has to raise capital. But even though the investment firm may make a substantial amount through underwriting fees and commissions, research analysts are prohibited from being compensated directly or indirectly from investment banking revenues.

Instead, research analysts are compensated over and above their salaries from a bonus pool. These periodic bonuses are determined by a number of factors including trading activity based on the analysts' recommendations, the success of such recommendations, the profitability of the firm, and its capital markets division and buy-side rankings.

Nonetheless, due to larger bonuses, entry-level investment bankers may receive total compensation that is higher than their research counterparts, and this gap may widen markedly over time.­

Is Equity Research the Same As Investment Banking?

No, equity research is not the same as investment banking. Both jobs have similarities but clear distinctions in overall purpose. Equity researchers evaluate companies with the goal of making investment recommendations. They analyze a company in all aspects, from its financials to its competition to its industry outlook, and its share price, to determine how the company might perform in the future and how its share price might move. Investment bankers also analyze companies in a similar fashion, but their goal is to determine whether a company is suitable for a merger or acquisition.

What Skills Do You Need for an Equity Research Job?

The skills required for an equity research job include an understanding of finance, economics, and accounting. An equity researcher must be able to analyze a company's financial statement. Equity researchers should also know financial modeling, Excel, and valuation methods. In addition to the quantitative skills required, equity researchers should be able to write well as they will be writing investment recommendations based on their quantitative analysis.

How Many Hours Does an Equity Research Associate Work?

An equity research associate typically works 55 to 60 hours per week, which can increase to 70 to 80 hours per week during earnings releases. Typically, equity researchers do not need to work weekends. The hours for an equity research associate or analyst are often less than that of an investment banker, who often has to work weekends.

Overall, if one has to make a choice between embarking on a career in equity research versus one in investment banking, factors such as work-life balance , visibility, and barriers to entry favor equity research. On the other hand, factors like prospects for advancement, job functions, and compensation tilt the scales in favor of investment banking. Ultimately, however, the choice comes down to your own skill set, personality, education, and ability to manage work pressures and conflicts of interest.

Payscale. " Average Equity Analyst Salary ."

Mergers and Inquisitions. " The Equity Research Associate: Remnant of a Dying Industry, or the Hero That Gotham Deserves ."

Career Principles. " Investment Banking Hours: The 100-Hour Work Week ."

Forbes. " After Complaints of ‘100-Hour’ Workweeks, Goldman Sachs Is Allowing Bankers To Take Off on Saturdays ."

FINRA. " Series 79 – Investment Banking Representative Exam ."

U.S. Securities & Exchange Commission. " Ten of Nation's Top Investment Firms Settle Enforcement Actions Involving Conflicts of Interest Between Research and Investment Banking ."

Wall Street Oasis. " What Is a Summer Analyst (SA)? "

PayScale. " Average Investment Banking Analyst Salary ."

Wall Street Oasis. " Investment Banker Salary & Compensation, Average Bonus in Banking ."

PayScale. " Average Equity Analyst Salary ."

U.S. Securities and Exchange Commission. " Commission Approves Rules To Address Analyst Conflicts; SEC Also Requires Edgar Filings by Foreign Issuers ."

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