Investment Banking vs. Equity Research: What is the Difference?
Considering a career in investment banking or equity research? In the following insider’s guide, we’ll compare the differences in compensation, work flow, and lifestyle between the two careers.
The role of an equity research analyst is mainly analyzing publicly-traded equities to publish reports containing company and industry-specific insights to support a formal recommendation.
On the other hand, a career in investment banking is based around providing advisory services to clients on mergers and acquisitions (M&A), and initial public offerings (IPOs).
- Investment Banking vs. Equity Research: What is the Difference?
- What Does an Equity Research Analyst Do?
- Equity Research Report Example (PDF)
- How to Become an Equity Research Analyst
- What is the Salary in Equity Research?
- How is the Lifestyle in Equity Research?
- How is the Quality of Work in Equity Research?
- What are the Exit Opportunities from Equity Research?
- Scorecard: Investment Banking vs. Equity Research
What Does an Equity Research Analyst Do?
Equity research analysts closely analyze small groups of stocks in order to provide insightful investment ideas and recommendations to the firm’s salesforce and traders, directly to institutional investors and (increasingly) to the general investing public.
Over the course a year, research analysts communicate formally via research reports that place “Buy,” “Sell,” or “Hold” ratings on the companies they cover.
The timing of the publication of reports tend to be concentrated around earnings season (i.e. quarterly reports), as well as on an ad hoc basis.
Since equity research analysts generally focus on a small group of stocks (5-15) within particular industries or geographic regions, they become experts in the specific companies and industry or “coverage universe” that they analyze.
Analysts need to know everything about their coverage universe in order to make investment recommendations. As such, analysts constantly communicate with the management teams of their companies under coverage and maintain comprehensive financial models about these companies.
They quickly digest and respond to new information that hits the tape.
New developments and ideas are communicated to the investment bank’s sales force, traders, directly to institutional clients, and directly to the general investment public over the phone, and directly to the trading floor via an intercom system or over the phone.
Equity Research Report Example (PDF)
Curious to see what sort of analysis is performed by an equity research analyst?
Fill out the form below to download an equity research report published by JP Morgan covering Hulu.
How to Become an Equity Research Analyst
If you enjoy writing, financial analysis and getting home at a reasonable hour, equity research might be for you.
If you enjoy writing, getting involved with clients and management teams, building financial models and conducting financial analysis all while getting home at a reasonable hour (9pm vs. 2am), equity research might be for you.
Research associates (that would be your title coming in as an undergrad) go through similar training to that of sales and trading analysts.
After 2-3 months of corporate finance, accounting and capital markets training, research associates are assigned to a group led by a senior analyst.
The group is made up of zero to three other junior associates. The group starts off covering a group of stocks (usually 5-15) within a specific industry or region.
