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    1-Equity Research - Introduction PDF

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    Aindrila Sil
    Equity research involves qualitative and quantitative analysis to make a recommendation on whether a company's shares are worth buying or selling. Equity research can be used for areas like mergers and acquisitions, trading activities, IPOs, and investment management. Research can be conducted internally for a company's own investments (buy side) or externally for customers of a brokerage house (sell side). The success of equity research is measured by how much the stock returns outperform market expectations, known as "alpha".

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    1-Equity Research - Introduction PDF

    Uploaded by

    Aindrila Sil
    119 views3 pages
    Equity research involves qualitative and quantitative analysis to make a recommendation on whether a company's shares are worth buying or selling. Equity research can be used for areas like mergers and acquisitions, trading activities, IPOs, and investment management. Research can be conducted internally for a company's own investments (buy side) or externally for customers of a brokerage house (sell side). The success of equity research is measured by how much the stock returns outperform market expectations, known as "alpha".

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    1-Equity Research - Introduction.pdf

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    Equity research involves qualitative and quantitative analysis to make a recommendation on whether a company's shares are worth buying or selling. Equity research can be used for areas like mergers and acquisitions, trading activities, IPOs, and investment management. Research can be conducted internally for a company's own investments (buy side) or externally for customers of a brokerage house (sell side). The success of equity research is measured by how much the stock returns outperform market expectations, known as "alpha".

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    119 views3 pages

    1-Equity Research - Introduction PDF

    Uploaded by

    Aindrila Sil
    Equity research involves qualitative and quantitative analysis to make a recommendation on whether a company's shares are worth buying or selling. Equity research can be used for areas like mergers and acquisitions, trading activities, IPOs, and investment management. Research can be conducted internally for a company's own investments (buy side) or externally for customers of a brokerage house (sell side). The success of equity research is measured by how much the stock returns outperform market expectations, known as "alpha".

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    Download as pdf or txt
    of 3

    Equity Research

    A QUALITY E-LEARNING PROGRAM BY WWW.LEARNWITHFLIP.COM

    Equity Research - Introduction

    Equity research involves:


    • Qualitative Analysis: analysis of the economy and the industry the business is in and
    • Quantitative Analysis: analysis of the financial information of the company.

    An Equity Research analyst’s goal is to make a recommendation on whether the shares of a


    company are worth buying or selling at the current market price.

    Equity research can be used for areas such


    • Merger & acquisitions
    • Trading activities
    • IPOs & fund offerings
    • Investment management

    Equity Research can be:

    Buy side research: In-house research for a company for its own investments, for example a
    Mutual Fund.

    Sell side research: Research for external entities such as customers of a brokerage house.
    The activity of research can comprise of:

    Front end research: Talking to the management of the companies regarding the business
    plans.

    Back end research: Analyzing financial statements, industry trends and other such forms of
    research.

    The success of equity research can be measured by ‘alpha’. Alpha is a measure of by how much
    does your research better market expectation.

    Alpha = Actual stock return – Expected return (based on market index)

    Key Terms

    ADR or American Depository Receipt: An ADR is a negotiable certificate issued by an


    American bank. It represents a certain number of shares of a foreign company, which have
    been deposited with the American bank.

    Bellwether Stock: This is a stock which assumes a position of market leadership.

    Book Value: The value at which an asset is carried on a balance sheet.

    ©Finitiatives Learning India Pvt. Ltd. (FLIP), 2014. Proprietary content. Please do not misuse!
    Equity Research
    A QUALITY E-LEARNING PROGRAM BY WWW.LEARNWITHFLIP.COM

    Bull & Bear Markets: Bull market refers to a market that is on the rise. Bear market is a
    steady drop in stock prices over a period of time.

    Face Value: The nominal or stated amount assigned to a security by the issuer. It is also
    known as ‘par value’, or simply ‘par’.

    FIIs: Refers to Foreign Institution Investors. They invest money in financial


    markets across the globe, different from the one, where they are originally incorporated.

    Intrinsic Value: Refers to the value of a share based on fundamental strength and future
    potential. It is also called ‘fair value’.

    Market Capitalization (Cap):

    It is the total market value, at the current stock exchange list price, of the total number of
    equity shares issued by a company.

    Free float of a company is an estimate of the proportion of shares that are freely traded in
    the market.
    Market Capitalization (using free float) = Market Price * Number of Outstanding Shares of the
    Company * Free Float Factor

    Overheated Market: Demand-Supply mismatch, where too much money is chasing too few
    shares, leading to sharp price rises.

    Smart Money: Investments by informed or knowledgeable investors.

    Sunrise Industries: Growth areas which are going to play an important role in a country’s
    economy.

    Stock Classifications

    Interest Rate Sensitive Stocks: Directly affected by interest rate changes, e.g. banking
    sector stocks.

    Commodity Pack: stocks highly dependent on global commodity prices and the state of the
    global economy.

    Policy Driven Stocks: stocks whose prices get affected by change in government policy, e.g.
    oil companies.

    Stocks Driven by Domestic Demand: Stocks of businesses whose demand comes domestic
    consumers, hence largely unaffected by global events.

    Stocks Vulnerable to External Economies: These are dependent on global demand, e.g. IT
    and BPO sector stocks.

    ©Finitiatives Learning India Pvt. Ltd. (FLIP), 2014. Proprietary content. Please do not misuse!
    Equity Research
    A QUALITY E-LEARNING PROGRAM BY WWW.LEARNWITHFLIP.COM

    FII Favorites: These are stocks that are preferred by Foreign Institutional Investors (FIIs) and
    move in tandem with their operations; mainly the index and large cap stocks.

    ©Finitiatives Learning India Pvt. Ltd. (FLIP), 2014. Proprietary content. Please do not misuse!

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