Equity Research

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What Is Equity Research?

Equity Research is a division within either a buy-side or sell-side firm which is responsible for the research used by the firm and its clients. Despite the name, Equity Research can also include commodities, bonds are more along with equities. The purpose of an equity researcher is to provide insight and detailed analysis into a company, entity or sector and this information is then used by investors to decide how to allocate their funds and by Private Equity firms and investment banks to value companies for mergers, LBOs, IPOs etc. Buy-side firms will then pay theequity research team for access to their information, and this is why equity research is a revenue-producing group for an investment bank.
Typically an equity research department is split into different coverage groups. These coverage groups will be small teams and they will focus on a specific sector (i.e. mining, energy & resources, healthcare, consumer etc.). Each team will usually cover 5-20 companies.

What Do You Do In Equity Research?

The work within equity research is split into research / reporting and projections. The research work is fairly self explanatory; the associate or analyst will spend time investigating both the company in question, competitors and the industry in general and take note of all the relevant issues. This information can either come from people in the industry, online information resources (i.e. Google) or other agencies. Every quarter the research team will compile what it has done into a Research Report which is issued to its clients.
The projection work is similar to that of valuation in banking, the researcher will estimate growth rates and valuations for companies several years into the future. The Investment Banking Division will often use equity research reports as the basis for their models, and this is yet another example of how the front-office departments within a bank are interlinked.
Unlike most other financial institutions, the junior level within Equity Research is called ‘Associate’ level whilst the more senior staff are called ‘Analysts’. The most common way of joining an Equity Research team is either out of education (the same as in banking) or as a lateral hire from industry / another sector in the bank.

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