This post is a follow-up to last month’s post, “Investment Banking vs Equity Research.”
In case there was still someone left on the planet who thinks that sell-side equity research isn’t riddled with conflicts of interest that render its’ ratings meaningless, banking analyst Mike Mayo takes you on an inside look at how the system works (or, more accurately, doesn’t work).
Here are the cliff’s notes: The system is a joke. If you put a ‘sell’ rating on a stock, you will be ostracized internally, lose access to management, and face a backlash from traders. The pressure is so great on analysts to avoid this fate that sell ratings make up only 5% of the total on Wall Street.