What is the meaning of equity research?

Answer 1

Equity research is, you guessed it, researching and analyzing equities, or stocks. These stocks trade on various stock markets such as the New York Stock Exchange, NASDAQ, AMEX (which are the main U.S. stock markets) or foreign stock markets. Equity research analysts are usually employed by financial firms that have equity research departments made up of numerous analysts, each of which focuses on being an "expert" on a particular industry. There are numerous industries within the 10 sectors. Those 10 sectors are the consumer discretionary, consumer staples, energy, industrials, financials, healthcare, materials, information technology, telcommunications and utilities sectors. Equity research analysts typically study finance in college and graduate school. However, a number of them may have studies other areas. For example, a health care analyst covering pharmaceuticals may have studied pharmacy in college. On a daily basis, equity research analysis closely "follow", or monitor a number of stocks. For example, a PC hardware equity research analyst would probably spend a great deal of time monitoring the business of Dell Computer and any news that may affect dell. For example, if Microsoft decided to begin to sell computers, that would likely be a problem for Dell since that would mean that Dell has more competition. The analyst would try to quanitify what that means for Dell's sales and profits. In addition to just monitoring current events with companies, equity research analysts typically write equity research reports, which explain and analyze what a company's business is. As part of that analysis, the analyst will "model" the company's financial statements. In other words, the analyst will try to predict how many computers, etc. a particular company can sell and how much profit the company could make. To create the model, the analyst will use Microsoft Excel, which is a spreadsheet program that allows for easy calculation of numerous equations, some of which could be very complex. Most very successful equity research analysts: 1. Are very analytical and detail oriented; 2. Have a solid grasp of financial and economic concepts; 3. Are relatively good at math; 4. Are very curious and aren't afraid to ask a lot of questions; and 5. Are willing to work hard since it is not uncommon for an equity research analyst to work more than 12 hours a day.