Equity Research & Financial Modeling

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. The main purpose of equity research is to provide investors with detailed financial analysis and recommendations on whether to buy, hold, or sell a particular investment. Banks often use equity research as a way of “supporting” their investment banking and sales & trading clients, by providing timely, high-quality information and analysis. Jefferies is a leading global, full-service investment banking and capital markets firm that provides advisory, sales and trading, research and wealth and asset management services.

Analysts are usually divided into industry sectors to cover similar companies within an industry. Most sectors have a lot of specialized knowledge required, so it makes sense for an analyst to stick to one industry where they can become experts. When an investment bank publishes valuable equity research for an institutional client, that client is then likely to use the bank to execute their trades for that stock. The bank may also use the report to persuade the client to buy more shares in a holding they already have, to therefor further increase commissions. This type of model includes multiple business units added into one single model. Typically, each business unit has its own tab, with a consolidation tab that simply sums up the other business units.

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The two main types of option pricing models are binomial tree and Black-Scholes. These models are based purely on mathematical formulas rather than subjective criteria and, therefore, are more or less a straightforward calculator built into Excel. Individuals who work as Equity Research Analysts are typically employed in urban areas since these areas serve as the region’s financial center. This is why Equity Research Reports frequently include “Buy” recommendations and seldom, if ever, include “Sell” ratings.

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. 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, equity research financial modeling they get the opportunity to work on exciting deals such as mergers and acquisitions or initial public offerings. There has been a growing backlash against the atrocious hours demanded by investment banking analysts. Although this has led to a number of Wall Street firms capping the number of hours worked by junior bankers, these restrictions may do little to change the “work hard, play hard” culture of investment banking.

  • Both of these positions are critical in a financial organization and are equally important in India.
  • The knowledge is vital for the sales agent since it allows him or her to offer investments to their clients and the general public.
  • Combine the information in the company’s financial statements with the projections and information gleaned from the industry analysis to arrive at projections for the next few years.
  • When researching prominent stock market employment opportunities, you may come across the position of risk management analyst.

These reports are distributed for free for a variety of reasons (explained below) and have a specific recommendation to buy, sell, or hold as well as an expected target price. A leveraged buyout transaction typically requires modeling complicated debt schedules and is an advanced form of financial modeling. An LBO is often one of the most detailed and challenging of all types of financial models, as the many layers of financing create circular references and require cash flow waterfalls. These types of models are not very common outside of private equity or investment banking. 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.


Many pursue their Series 7 or Series 63 FINRA licenses to demonstrate this knowledge. The most common complaint of those who have quit investment banking is that the total lack of work-life balance leads to burnout. Those interested in investment banking should strongly consider pursuing a Master of Business Administration (MBA) or other professional qualifications. In this section of an equity research report, there will be lots of information on trends and competition in the industry. This is where frameworks like Porter’s Five Forces or a PEST analysis can come in handy to ensure that you’ve covered all the dynamics in the industry, including politics, economics, social trends, and technological innovation, to name a few.

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Evolution will come fastest to European banks, followed quickly by the United States, while the Asian market may be slower to change. We’ve written about this extensively in our guides on how to be a good financial analyst, as well as providing a breakdown of financial modeling skills. Over 1.8 million professionals use CFI to learn accounting, financial analysis, modeling and more. Start with a free account to explore 20+ always-free courses and hundreds of finance templates and cheat sheets. 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.

Introduction to Financial Modeling

Equity research is also another destination for prospective financial employees. The result will be an increase in both the magnitude and the pace of change in equity research, reducing the scale of the research business and reshaping its economics. Nonetheless, equity research still offers an attractive business opportunity for banks and broker-dealers that can adapt to deliver the types of research the buy side values and also successfully transform their operating models. One of the core jobs of equity research is to analyze historical financial results and compare them to the guidance that was given, or compare them to the analyst’s expectations.

If you want to work in equities research and portfolio management, equity research analysts in India are the ideal way to get started. Another thing to keep in mind is that you can begin your career as a risk management analyst and then transition to equities research after accumulating solid job experience. To educate yourself on the extensive research process of assessing stocks or firms, you might check into the Certification in Online Equity Research Analysis program or the Classroom Certification in Equity Research Analysts in India program. Sell side firms such as investment banks produce equity research reports to be disseminated to their sales and trading clients and wealth management clients.

Later on, the skill sets diverge, with investment bankers required to be adept at closing deals, handling large transactions, and managing client relationships. To succeed in this transformed environment and meet asset managers’ more exacting standards, banks and broker-dealers will need to focus on the changing nature of the types of research the buy side finds useful and overhaul their offerings. Long-only active managers and hedge funds focused on equities are demanding less in the way of traditional products (that is, single-stock research reports) and more in services, such as access to analysts and corporate management. Moreover, investors are seeking new forms of information and analytics, through big data and artificial intelligence (AI), which can complement conventional fundamental research in portfolio decision making. An equity research report is a document prepared by an Analyst that provides a recommendation on whether investors should buy, hold, or sell shares of a public company.

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This is similar to a Sum of the Parts exercise where Division A and Division B are added together and a new, consolidated worksheet is created. IIM SKILLS, provides a diverse choice of world-class courses such as Digital Marketing, Content Writing, and so on. The institute provides learning freedom and success tools, allowing companies, learners, publishers, and workers to empower themselves and others. They must uncover the story hidden beneath a company’s data, whether qualitative or quantitative.

The performance of a stock is largely based on reality vs expectations, so it’s important for an analyst to analyze and understand if the actual historical results were below, at, or above market expectations. The key, though, is joining your sector team and immediately starting to help them meet their commercial goals as you set out on the work of a research analyst. Our research brand is serious, we seek to find differentiated information to be able to draw conclusions that challenge the stock market consensus and thus impact our client’s vision of the future for their investments.