equity research interview guide

Trending Courses

Course Categories

Certification Programs

Free Courses

Investment Banking Resources

Free Practice Tests
On Demand Webinars

Equity Research Interview Questions (with Answers)

Published on :

21 Aug, 2024

Blog Author :

Wallstreetmojo Team

Edited by :

Ashish Kumar Srivastav

Reviewed by :

Dheeraj Vaidya

Equity Research Interview Questions

If you are called for an equity research interview, you can be asked any question from anywhere. However, you should not take this lightly as this can change your Finance career. Equity Research interview questions are a mix of technical and tricky questions. So, you need to have a thorough knowledge of financial analysis , valuation, financial modeling, the stock market, current events, and stress interview questions.

Let's find below the top 20 Equity Research interview questions that are repeatedly asked for the positions of equity research analysts .

30 Equity Research Analyst Interview Questions and Answers

Common Equity Research Analyst interview questions, how to answer them, and example answers from a certified career coach.

In the world of finance, equity research analysts play a pivotal role in uncovering investment opportunities and providing valuable insights to investors. To excel in this field, you need not only exceptional analytical skills but also strong communication abilities to convey complex financial information effectively. As you prepare to enter an interview for an Equity Research Analyst position, showcasing your expertise in these areas will be paramount.

To help guide you through the interview process and highlight your strengths as a candidate, we’ve compiled a list of common Equity Research Analyst interview questions along with tips on how to approach them with confidence and competence.

1. Can you explain the difference between top-down and bottom-up approaches in equity research?

This question aims to assess your understanding of the two main methodologies used in equity research. Demonstrating your knowledge of top-down and bottom-up approaches not only showcases your expertise in the field but also highlights your ability to apply different analytical techniques to evaluate investment opportunities based on macroeconomic factors, industry trends, or company-specific attributes.

Example: “Certainly. In equity research, the top-down approach starts with a macroeconomic analysis to identify industries or sectors that are expected to perform well in the current economic environment. Analysts then narrow down their focus within those promising sectors to find individual companies with strong fundamentals and growth potential. This method emphasizes the importance of broader market trends and sector performance in driving stock prices.

On the other hand, the bottom-up approach focuses primarily on the analysis of individual companies, regardless of the industry or sector they belong to. Analysts examine company-specific factors such as financial statements, management quality, and competitive advantages to determine the intrinsic value of a stock. The idea behind this approach is that if a company has strong fundamentals, it will eventually outperform its peers and deliver returns to investors, irrespective of the overall market conditions.

Both approaches have their merits, and many analysts use a combination of both methods to make informed investment decisions. While the top-down approach helps identify attractive sectors in a given economic climate, the bottom-up approach ensures that investments are made in fundamentally sound companies.”

2. What is your experience with financial modeling, and which types of models have you built?

Your ability to create and analyze financial models is a cornerstone skill for an equity research analyst. Interviewers want to gauge your expertise in this area and understand your experience with different types of models such as discounted cash flow, leveraged buyout, and mergers & acquisitions. These models are essential for making investment recommendations, understanding market trends, and assessing the financial health of companies. Showcasing your proficiency in financial modeling can help demonstrate your value as a potential candidate for the role.

Example: “Throughout my career as an equity research analyst, I have gained extensive experience in financial modeling. I have built various types of models to analyze and forecast company performance, which has been instrumental in making informed investment decisions.

Some of the key models I’ve worked on include discounted cash flow (DCF) models for valuation purposes, three-statement models that project income statements, balance sheets, and cash flow statements, and sensitivity analysis models to assess how changes in certain variables impact a company’s value. Additionally, I have experience with merger and acquisition (M&A) models, where I analyzed potential synergies and accretion/dilution scenarios.

My proficiency in financial modeling software, such as Excel, along with my strong understanding of accounting principles and industry-specific drivers, allows me to create accurate and insightful models that support strategic decision-making processes.”

3. How do you determine a company’s intrinsic value using discounted cash flow (DCF) analysis?

A deep understanding of financial valuation methods is essential for an equity research analyst. The DCF analysis is a widely used technique to evaluate a company’s intrinsic value. Interviewers want to ensure that you have a strong grasp of this method and can apply it in real-life scenarios to provide accurate valuations that will guide investment decisions and recommendations. Your answer should demonstrate your knowledge of the DCF process and your ability to critically analyze a company’s financial health.

Example: “To determine a company’s intrinsic value using discounted cash flow (DCF) analysis, I start by projecting the company’s free cash flows for a specific period, usually five to ten years. Free cash flow is calculated as operating cash flow minus capital expenditures. These projections are based on historical financials, industry trends, and any relevant information about the company’s growth prospects.

Once I have projected the free cash flows, I calculate the present value of these cash flows by discounting them using the company’s weighted average cost of capital (WACC). WACC represents the required rate of return for both equity and debt holders and serves as an appropriate discount rate in DCF analysis. After obtaining the present value of the projected cash flows, I estimate the terminal value, which represents the present value of all future cash flows beyond the projection period. The terminal value is typically calculated using either the perpetuity growth method or the exit multiple method.

Finally, I add the present value of the projected cash flows and the terminal value to arrive at the company’s intrinsic enterprise value. To obtain the intrinsic equity value, I subtract the net debt from the enterprise value and divide the result by the number of outstanding shares. This gives me the estimated intrinsic value per share, which can be compared with the current market price to identify potential investment opportunities.”

4. Describe your process for conducting industry and competitive analysis.

Hiring managers are keen to know whether you have a solid methodology for researching and analyzing industries and competitors, as this is a core responsibility of an equity research analyst. Your approach to gathering data, identifying trends, and analyzing financial statements will be critical in delivering accurate and insightful recommendations to clients and stakeholders. A well-structured and efficient process speaks to your expertise and ability to effectively perform in the role.

Example: “When conducting industry and competitive analysis, I start by identifying the key players in the market and their respective market shares. This helps me understand the competitive landscape and determine which companies are dominating or emerging within the sector.

I then analyze macroeconomic factors that may impact the industry, such as regulatory changes, technological advancements, and consumer trends. This provides a broader context for understanding how external forces might influence the performance of individual companies.

To assess each company’s competitiveness, I examine their financial statements, management team, product offerings, and growth strategies. Additionally, I perform SWOT (Strengths, Weaknesses, Opportunities, Threats) analyses to identify potential advantages and challenges they face compared to their competitors. Finally, I synthesize all this information into actionable insights and investment recommendations, ensuring my clients have a comprehensive understanding of the industry dynamics and the relative strengths of the companies within it.”

5. What are some key financial ratios that you use to evaluate a company’s performance?

Understanding financial ratios is essential for an equity research analyst, as they provide a snapshot of a company’s financial health and performance. When interviewers ask this question, they want to know if you have the necessary knowledge and analytical skills to make informed decisions and recommendations based on these ratios. Showcasing your ability to efficiently analyze financial data using key ratios demonstrates your competency and value as an equity research analyst.

Example: “As an equity research analyst, I rely on several key financial ratios to evaluate a company’s performance. Some of the most important ones include:

1. Price-to-Earnings (P/E) Ratio: This ratio compares the market price of a stock to its earnings per share, helping me assess whether a company is overvalued or undervalued relative to its peers and historical averages.

2. Debt-to-Equity Ratio: This metric measures a company’s leverage by comparing its total debt to shareholders’ equity. A higher ratio may indicate increased risk, while a lower ratio suggests more conservative financing practices.

3. Return on Equity (ROE): ROE calculates the return generated on shareholders’ investments by dividing net income by average shareholders’ equity. It helps me gauge management’s effectiveness in generating profits from invested capital.

4. Gross Margin: Calculating gross profit as a percentage of revenue, this ratio provides insight into a company’s pricing strategy and cost structure, which can be useful for comparing companies within the same industry.

5. Current Ratio: This liquidity measure compares a company’s current assets to its current liabilities, indicating its ability to meet short-term obligations. A higher ratio suggests better financial health and lower liquidity risk.

These ratios, among others, provide valuable insights into a company’s financial health, profitability, and overall performance, allowing me to make informed investment recommendations.”

6. Explain how you would analyze a company’s balance sheet, income statement, and cash flow statement.

Delving into a company’s financial statements is a critical aspect of an equity research analyst’s role, as it helps to determine the overall financial health and value of the organization. By asking this question, interviewers want to gauge your ability to analyze and interpret financial data, your understanding of key financial concepts, and your attention to detail, all of which are important for making informed investment recommendations.

Example: “When analyzing a company’s financial statements, I start with the balance sheet to assess its overall financial health. I examine key ratios such as the current ratio, quick ratio, and debt-to-equity ratio to understand the company’s liquidity, solvency, and capital structure. This helps me determine if the company has sufficient resources to meet short-term obligations and how it manages long-term debt.

Moving on to the income statement, I focus on revenue growth, gross margin, operating margin, and net profit margin to evaluate the company’s profitability and efficiency. Analyzing trends in these metrics over time can reveal potential strengths or weaknesses in the business model. Additionally, I compare these figures to industry peers to gauge the company’s performance relative to competitors.

Finally, I analyze the cash flow statement to gain insight into the company’s ability to generate cash from operations, investing activities, and financing activities. Free cash flow is a particularly important metric, as it indicates the amount of cash available for reinvestment or distribution to shareholders. A positive trend in free cash flow suggests that the company is effectively managing its resources and has the potential for future growth.”

7. How do you stay up-to-date on market trends and news relevant to the industries you cover?

Keeping your finger on the pulse of market trends and news is essential for an equity research analyst. Employers want to know that you have effective strategies in place to stay informed and up-to-date on the industries you cover. This demonstrates your commitment to providing accurate and insightful analysis, which ultimately helps your firm make well-informed decisions about investments and portfolio management.

Example: “Staying up-to-date on market trends and news is essential for an Equity Research Analyst, as it directly impacts the quality of our analysis and recommendations. To ensure I’m well-informed, I start my day by reading financial news from reputable sources such as The Wall Street Journal, Financial Times, and Bloomberg. This helps me stay current with any major events or announcements that could affect the industries I cover.

Furthermore, I subscribe to industry-specific newsletters and follow relevant blogs, podcasts, and social media accounts to gain insights into emerging trends and developments. Additionally, I attend conferences and webinars to learn from experts in the field and network with other professionals. This combination of daily news updates, targeted industry resources, and continuous learning opportunities allows me to maintain a comprehensive understanding of the industries I cover and provide valuable insights to clients.”

8. Have you ever had to change your recommendation on a stock due to new information or changing circumstances? If so, please describe the situation.

Being an equity research analyst requires adaptability and an openness to changing perspectives based on new information or market shifts. When interviewers ask this question, they’re looking for evidence of your ability to analyze new data and adjust your investment recommendations accordingly. They want to know that you’re not stubbornly clinging to your initial views but are instead able to recognize when a change in strategy is warranted for the best interest of clients and stakeholders.

Example: “Yes, I have experienced a situation where I had to change my recommendation on a stock due to new information. I was covering a pharmaceutical company that was in the process of developing a promising drug for a rare disease. My initial analysis and valuation indicated a strong buy recommendation based on the potential market size and the company’s solid financial position.

However, during the clinical trial phase, the company released an update stating that the drug had failed to meet its primary endpoint, which significantly impacted its chances of receiving regulatory approval. This new information prompted me to reevaluate my recommendation. I conducted a thorough reassessment of the company’s pipeline, factoring in the setback and its implications on future revenue projections.

After this comprehensive review, I changed my recommendation from a strong buy to a hold, as the risk associated with the company’s growth prospects had increased substantially. In situations like these, it is essential to remain adaptable and responsive to new information, ensuring that our clients receive accurate and timely advice to make informed investment decisions.”

9. What factors do you consider when determining a target price for a stock?

Analyzing stocks is a complex process that requires a deep understanding of both financial fundamentals and the broader market environment. Interviewers ask this question to gauge your proficiency in assessing a company’s intrinsic value and determining an appropriate target price. They want to ensure you can take into account various factors, such as financial performance, industry trends, competitor analysis, and macroeconomic factors, and synthesize them into a coherent investment recommendation.

Example: “When determining a target price for a stock, I consider several factors to ensure a comprehensive analysis. First, I analyze the company’s financial statements, focusing on key metrics such as revenue growth, profit margins, and return on equity. This helps me understand the company’s historical performance and its ability to generate profits.

Another critical factor is industry trends and competitive landscape. I research market dynamics, potential disruptors, and competitors’ strategies to gauge the company’s position within the sector and identify any threats or opportunities that may impact its future performance.

I also incorporate valuation multiples into my analysis, comparing the company’s current valuation with its peers and historical averages. Commonly used multiples include Price-to-Earnings (P/E), Enterprise Value-to-EBITDA (EV/EBITDA), and Price-to-Sales (P/S). These ratios help me determine if the stock is overvalued or undervalued relative to its industry and historical norms.

Taking these factors into account, along with any qualitative aspects specific to the company, I develop a financial model to project future earnings and cash flows. Based on these projections, I use discounted cash flow (DCF) analysis to estimate the intrinsic value of the stock, which ultimately informs my target price recommendation.”

10. Can you discuss any recent mergers or acquisitions in the sector(s) you follow and their implications for the companies involved?

As an equity research analyst, staying informed about current market trends, mergers, and acquisitions is a fundamental part of your job. Your ability to analyze these events and their potential impact on the companies you follow demonstrates your knowledge and understanding of the industry. Interviewers ask this question to gauge your expertise and ensure that you’re up-to-date with the latest events, capable of providing valuable insights to clients or colleagues.

Example: “One recent merger that caught my attention was the acquisition of Slack Technologies by Salesforce in December 2020. This deal, valued at $27.7 billion, aimed to strengthen Salesforce’s position in the enterprise software market and expand its product offerings beyond customer relationship management (CRM) solutions.

The implications for both companies are significant. For Salesforce, acquiring Slack allows them to better compete with rivals like Microsoft, which offers a similar collaboration tool called Teams. Integrating Slack into their ecosystem will enable Salesforce to provide a more comprehensive suite of services to clients, potentially driving increased revenue and user engagement. Additionally, this acquisition could help Salesforce attract new customers who were previously using other communication platforms.

On the other hand, Slack benefits from the resources and reach of Salesforce, one of the largest players in the industry. With Salesforce’s backing, Slack can accelerate its growth and development, allowing it to scale faster and enhance its features. Furthermore, being part of Salesforce’s extensive network may open up opportunities for cross-selling and upselling, ultimately boosting Slack’s overall performance and value proposition.”

11. How do you handle situations where your investment thesis is challenged by colleagues or clients?

Navigating conflicting opinions is a key aspect of working in finance, especially as an equity research analyst. When interviewers ask this question, they want to know that you can handle constructive criticism, engage in thoughtful discussions, and ultimately remain open-minded. It’s important for them to see that you can maintain professionalism, defend your investment thesis when necessary, and adapt your perspective when presented with new information. This ability to collaborate and learn from others is essential for making well-informed investment decisions.

Example: “When my investment thesis is challenged, I see it as an opportunity to refine and strengthen my analysis. First, I listen carefully to the concerns raised by colleagues or clients, ensuring that I fully understand their perspective. This helps me identify any gaps in my research or potential biases that may have influenced my conclusions.

After considering their input, I revisit my original analysis and reevaluate the assumptions and data points used. If necessary, I conduct further research to address the concerns raised and adjust my thesis accordingly. Throughout this process, I maintain open communication with those who challenged my thesis, discussing the changes made and providing a rationale for my decisions.

This approach not only improves the quality of my work but also fosters a collaborative environment where diverse opinions are valued. Ultimately, handling challenges constructively leads to better investment recommendations and strengthens relationships with both colleagues and clients.”

12. Describe your experience with earnings calls and investor presentations. How do you prepare for them?

The interviewer wants to gauge your experience and ability to gather, analyze, and interpret financial information from these sources. Earnings calls and investor presentations are an integral part of an equity research analyst’s role, as they provide valuable insights into a company’s financial performance and outlook. Your preparation and ability to extract the most relevant information will be essential in making informed investment recommendations.

Example: “As an equity research analyst, I have participated in numerous earnings calls and investor presentations. To prepare for these events, I first conduct thorough research on the company’s financials, industry trends, and recent news to gain a comprehensive understanding of its current position and potential future performance.

I then analyze the company’s historical earnings reports and compare them with analysts’ consensus estimates to identify any discrepancies or patterns that may provide insights into the upcoming results. Additionally, I review previous investor presentations and conference call transcripts to familiarize myself with management’s communication style and anticipate possible questions from investors.

During the actual event, I take detailed notes on key points discussed by the management team, focusing on their outlook, growth strategies, and any updates on ongoing projects or initiatives. Afterward, I use this information to update my financial models and recommendations accordingly, ensuring that my analysis remains relevant and accurate for clients and stakeholders.”

13. What tools and resources do you use to conduct your research and analysis?

Digging deep into the financial world is essential for an Equity Research Analyst. By asking this question, interviewers want to know if you have the right skills and know-how to navigate the vast ocean of data, sources, and tools available. They’re looking for candidates who can efficiently and effectively use these resources to gather information, analyze trends, make informed predictions, and ultimately, contribute to well-founded investment decisions.

Example: “As an equity research analyst, I rely on a combination of tools and resources to conduct thorough research and analysis. First and foremost, I utilize financial databases such as Bloomberg Terminal, FactSet, and Capital IQ to access company financials, industry data, and market information. These platforms provide me with real-time data and historical trends that are essential for understanding the performance of companies and industries.

Another valuable resource is company filings, including annual reports (10-K), quarterly reports (10-Q), and earnings call transcripts. These documents offer insights into management’s perspective on the company’s performance, strategy, and future outlook. Additionally, I keep up-to-date with news sources like The Wall Street Journal, Financial Times, and specialized industry publications to stay informed about market developments and emerging trends.

To complement these resources, I also use various analytical tools and techniques, such as discounted cash flow (DCF) models, comparable company analysis (CCA), and precedent transaction analysis (PTA). These methods help me evaluate a company’s intrinsic value and compare it against its peers in the market. Ultimately, by leveraging this diverse set of tools and resources, I can deliver well-informed investment recommendations backed by comprehensive research and analysis.”

14. How do you prioritize your coverage universe and manage your time effectively?

Efficient time management and prioritization skills are essential for an equity research analyst, as it ensures that you can effectively cover multiple stocks and industries while delivering timely, high-quality research. Interviewers ask this question to gauge your ability to balance competing demands and focus on the most significant tasks, which ultimately demonstrates your potential to excel in this fast-paced, high-stakes environment.

Example: “Prioritizing my coverage universe and managing time effectively is essential for an Equity Research Analyst, as it ensures that I can provide valuable insights to clients in a timely manner. To achieve this, I first categorize the companies within my coverage universe based on their market capitalization, industry sector, and overall relevance to our client base. This helps me identify high-priority stocks that require more frequent analysis and updates.

Once I have established priorities, I create a structured schedule to allocate appropriate time for each company. For high-priority stocks, I closely monitor news, earnings releases, and other relevant events, while also conducting regular in-depth analyses. For lower-priority stocks, I maintain periodic reviews and stay informed about significant developments. Additionally, I set aside dedicated time for ad-hoc research requests from clients or colleagues, ensuring that I can address any urgent needs without compromising my ongoing work.

This systematic approach allows me to efficiently manage my workload, deliver accurate and timely research, and ultimately support our clients’ investment decisions with well-informed recommendations.”

15. What is your approach to risk management when making investment recommendations?

Navigating risk is a critical component of an Equity Research Analyst’s role. The ability to balance potential rewards with the risks involved can directly impact the success of investment recommendations. By asking this question, interviewers want to gauge your understanding of risk management principles, how well you apply them, and your ability to communicate these strategies to clients and stakeholders. This insight helps them determine if you can make well-informed decisions that align with the company’s goals and risk tolerance.

Example: “When making investment recommendations, my approach to risk management involves a combination of thorough research and diversification. First, I conduct in-depth analysis on the company’s financials, industry trends, and competitive landscape to gain a comprehensive understanding of its potential risks and rewards. This includes evaluating key financial ratios, assessing management quality, and identifying any red flags that could impact future performance.

Once I have gathered sufficient information, I incorporate diversification into my recommendations by suggesting investments across various sectors, industries, and asset classes. This helps mitigate the overall portfolio risk while still providing opportunities for growth. In addition, I continuously monitor the recommended investments and macroeconomic factors to identify any changes in risk profiles, allowing me to adjust the recommendations accordingly and maintain an optimal balance between risk and return.”

16. Can you provide an example of a successful stock pick you made and the rationale behind it?

Interviewers want to gauge your ability to analyze financial data, identify trends, and make informed investment decisions. By asking for a specific example of a successful stock pick, they’re looking for evidence of your critical thinking skills, financial acumen, and ability to communicate your thought process. This helps them determine whether you have the expertise and foresight necessary to excel in the role of an equity research analyst.

Example: “Certainly, one of my most successful stock picks was Company XYZ in the renewable energy sector. At the time, I noticed a growing trend towards clean energy solutions and increasing government support for such initiatives. Additionally, Company XYZ had recently secured several significant contracts that would contribute to their revenue growth.

I conducted thorough research on the company’s financials, management team, and competitive landscape. My analysis revealed strong fundamentals, including an impressive track record of revenue growth, healthy profit margins, and a robust balance sheet. Furthermore, the company’s innovative technology positioned it as a leader within the industry, giving it a competitive edge over its peers.

Based on these factors, I recommended investing in Company XYZ, which proved to be a wise decision as the stock price appreciated significantly over the following months. This example demonstrates my ability to identify promising investment opportunities by analyzing market trends, conducting comprehensive research, and evaluating a company’s overall potential for success.”

17. How do you communicate your research findings and recommendations to clients or internal stakeholders?

The ability to communicate research findings and recommendations effectively is essential for an equity research analyst. Your findings can have significant impacts on investment decisions, and stakeholders rely on your expertise to guide them. Interviewers ask this question to assess your communication skills, your ability to present complex information in an accessible manner, and your understanding of the importance of clear communication in the world of finance.

Example: “When communicating my research findings and recommendations to clients or internal stakeholders, I prioritize clarity and conciseness. First, I present a high-level summary of my analysis, highlighting the key takeaways and investment thesis. This allows the audience to quickly grasp the main points and understand the rationale behind my recommendations.

Following the summary, I delve into the supporting details, such as financial metrics, industry trends, and company-specific factors that led me to my conclusions. To ensure my message is clear, I use visual aids like charts and graphs to illustrate data and trends effectively. Additionally, I tailor my communication style based on the audience’s level of expertise in the subject matter, ensuring they can easily comprehend the information presented.

Throughout the presentation, I encourage questions and feedback, fostering an open dialogue with the audience. This not only helps clarify any uncertainties but also provides valuable insights that may further refine my analysis. Ultimately, my goal is to deliver well-researched, actionable recommendations that enable informed decision-making for clients and stakeholders.”

18. Are there any specific sectors or industries that you specialize in or prefer to cover?

Your interviewer wants to gauge your knowledge, expertise, and passion for particular sectors or industries. This question provides valuable insight into your ability to dive deep into a specific subject matter, keep up with industry trends, and apply that knowledge to make informed investment decisions. Additionally, understanding your preferred focus areas can help the company determine if your interests align with their current or future research needs.

Example: “As an equity research analyst, I have had the opportunity to cover various sectors throughout my career. However, I particularly enjoy covering the technology sector due to its dynamic nature and potential for growth. The rapid pace of innovation in this industry presents unique challenges when it comes to analyzing companies and forecasting their performance.

My expertise in the technology sector has allowed me to develop a deep understanding of key trends, such as cloud computing, artificial intelligence, and cybersecurity. This knowledge enables me to provide valuable insights to clients and make informed recommendations on investment opportunities within the sector. Additionally, staying up-to-date with technological advancements keeps me engaged and motivated in my work, ultimately contributing to better analysis and decision-making.”

19. How do you incorporate macroeconomic factors into your analysis of individual stocks?

Understanding the macroeconomic landscape is essential for equity research analysts as it helps them to better evaluate the potential risks and opportunities for individual stocks. By asking this question, interviewers want to see that you can take a holistic approach to your analysis, integrating both company-specific information and broader economic trends to form well-rounded investment recommendations. This demonstrates your ability to provide valuable insights and contribute to the team’s overall investment decision-making process.

Example: “When analyzing individual stocks, I consider macroeconomic factors as an essential component of my research process. These factors help me understand the broader economic context in which a company operates and can significantly impact its performance.

I start by identifying key macroeconomic indicators relevant to the industry or sector the company belongs to, such as GDP growth, interest rates, inflation, unemployment rate, and consumer sentiment. This helps me gauge the overall health of the economy and potential headwinds or tailwinds for the industry. Next, I analyze how these factors have historically affected the company’s financial performance and stock price, looking for patterns and correlations that may provide insights into future trends.

Once I’ve gathered this information, I incorporate it into my fundamental analysis of the company, adjusting revenue projections, earnings estimates, and valuation multiples accordingly. This holistic approach allows me to better assess the potential risks and opportunities associated with a particular stock, ultimately leading to more informed investment decisions.”

20. What role does technical analysis play in your overall research process, if any?

As an equity research analyst, it’s essential to have a well-rounded approach to evaluating and recommending investments. Interviewers want to know if you can incorporate technical analysis into your overall research process, and if so, how you balance it with other methods like fundamental analysis. By understanding your approach to this aspect of investment analysis, they can gauge your ability to provide accurate, comprehensive, and timely recommendations for clients or internal decision-makers.

Example: “Technical analysis plays a complementary role in my overall research process. While I primarily focus on fundamental analysis to evaluate the intrinsic value of stocks, technical analysis helps me identify entry and exit points for investments based on market trends and price movements.

I use technical indicators such as moving averages, relative strength index (RSI), and support and resistance levels to gauge the stock’s momentum and potential trend reversals. This information assists me in making more informed decisions about when to initiate or close positions, which can be particularly useful during periods of increased market volatility.

However, it is important to note that I consider technical analysis as an additional tool rather than a standalone method for investment decision-making. My primary emphasis remains on understanding the company’s financial health, competitive position, and growth prospects through thorough fundamental analysis. Combining both approaches allows me to make well-rounded investment recommendations that take into account both long-term value and short-term market dynamics.”

21. Can you explain the concept of beta and its relevance in portfolio management?

This question aims to test your understanding of key financial concepts and their practical applications in the world of finance. Beta is a measure of a stock’s volatility in relation to the market, and it plays a significant role in portfolio management. By discussing beta, you demonstrate your knowledge of risk assessment and how it can be used to optimize investment strategies, which is a vital skill for an equity research analyst.

Example: “Beta is a measure of an individual stock’s or investment’s volatility in relation to the overall market. In other words, it represents the sensitivity of a security’s returns to fluctuations in the broader market index. A beta value greater than 1 indicates that the investment is more volatile than the market, while a beta less than 1 signifies lower volatility. A beta equal to 1 implies that the investment moves in tandem with the market.

In portfolio management, beta plays a critical role in assessing and managing risk. Portfolio managers use beta to construct well-diversified portfolios by combining assets with different levels of risk exposure. For instance, they may balance high-beta stocks with low-beta investments to achieve a desired level of risk-adjusted return. Additionally, understanding beta helps investors gauge how their investments might perform during various market conditions, enabling them to make informed decisions about asset allocation and risk tolerance.”

22. How do you assess the quality of a company’s management team?

Evaluating a company’s management team is a critical aspect of equity research, as the effectiveness of the leadership directly influences the company’s performance and investment potential. By asking this question, interviewers want to gauge your ability to identify key factors that determine the quality of a management team, such as their track record, communication skills, strategic vision, and ability to make sound decisions. This will provide insight into your analytical skills and understanding of the importance of strong leadership in driving a company’s growth and success.

Example: “Assessing the quality of a company’s management team is an essential aspect of equity research, as it can significantly impact the company’s performance and investment potential. One approach I use to evaluate management teams involves analyzing their track record in terms of strategic decision-making, financial performance, and industry experience.

I start by reviewing the executives’ backgrounds, including their education, previous roles, and achievements within the industry. This helps me understand their expertise and how well-suited they are for their current positions. Next, I examine the company’s historical financial performance under the current management, focusing on key metrics such as revenue growth, profitability, and return on equity. Consistent improvement in these areas often indicates effective leadership.

Furthermore, I pay attention to the management’s communication with investors through earnings calls, presentations, and interviews. Transparency, clarity, and responsiveness to investor concerns reflect positively on the management team. Finally, I consider any recent strategic decisions made by the management, such as mergers, acquisitions, or divestitures, and assess whether those choices align with the company’s long-term goals and create shareholder value. Combining these factors allows me to form a comprehensive view of the management team’s quality and its potential impact on the company’s future prospects.”

23. What is your experience with using Bloomberg terminals or other financial data platforms?

Hiring managers ask this question because proficiency in financial data platforms, like Bloomberg terminals, is a key skill for an equity research analyst. These tools are essential for gathering financial data, performing analysis, and drawing insights that drive investment decisions. Demonstrating your experience and comfort with these platforms illustrates that you can hit the ground running and efficiently contribute to the team from day one.

Example: “During my time as an intern at a financial services firm, I had the opportunity to extensively use Bloomberg terminals for various tasks. I primarily used them for gathering real-time market data, tracking news and events related to specific companies or industries, and analyzing historical trends. This allowed me to develop a strong understanding of how to navigate the platform efficiently and utilize its features effectively.

Apart from Bloomberg terminals, I have also worked with other financial data platforms such as FactSet and Thomson Reuters Eikon. These experiences have helped me become proficient in extracting relevant information and conducting comprehensive analyses to support investment decisions. My familiarity with these tools has been instrumental in enhancing the quality of my research and ensuring that I can provide valuable insights to the team.”

24. Describe a time when you had to meet tight deadlines for multiple research reports.

In the fast-paced world of finance, your ability to juggle multiple tasks and meet tight deadlines is critical. Interviewers want to hear about your time management skills, prioritization strategies, and ability to deliver high-quality work even under pressure. Sharing a real-life example demonstrates your capability to handle the demands of an equity research analyst role and assures them that you can thrive in a high-stress environment.

Example: “During my time at XYZ Financial, there was an instance when I had to prepare research reports for three different companies within the same industry, all with tight deadlines due to upcoming earnings releases. To manage this workload effectively, I prioritized tasks and allocated sufficient time for each report.

I started by gathering relevant data and information for all three companies simultaneously, as they shared some common industry trends and market factors. This allowed me to save time on research and maintain consistency across the reports. Next, I focused on analyzing the financials of each company individually, diving deep into their respective strengths, weaknesses, and growth prospects.

To ensure timely completion, I set intermediate milestones for myself and communicated my progress regularly with my manager. Additionally, I collaborated with colleagues who were familiar with these companies or had expertise in the specific sector, which helped me gain valuable insights and improve the quality of my analysis. Ultimately, I successfully delivered all three reports before the deadline, providing our clients with accurate and timely investment recommendations.”

25. Have you ever faced any ethical dilemmas in your role as an equity research analyst? If so, how did you handle them?

Navigating ethical dilemmas is an important aspect of being an equity research analyst. The financial industry requires professionals to maintain high ethical standards and adhere to regulatory guidelines. Interviewers want to ensure that you are aware of these responsibilities and can make sound ethical decisions, even in challenging situations. Sharing your experience in handling such dilemmas demonstrates your integrity, professionalism, and commitment to upholding the trust that clients and employers place in you.

Example: “Yes, I have faced ethical dilemmas in my role as an equity research analyst. One particular instance involved receiving non-public information about a company that could significantly impact its stock price. In this situation, it was essential to adhere to the principles of integrity and professionalism.

I immediately informed my supervisor about the information I had received and ensured that I did not act on or share this information with anyone else. We then consulted our compliance department to determine the appropriate course of action. They advised us to maintain confidentiality and refrain from making any investment decisions based on this information until it became public knowledge.

This experience reinforced the importance of upholding ethical standards in the financial industry and reminded me of my responsibility to protect the interests of investors and maintain the integrity of the market.”

26. Can you discuss any recent regulatory changes that have impacted the equity research industry?

This question is designed to test your understanding of the equity research industry and your ability to stay up-to-date on relevant regulatory shifts. Being aware of regulatory changes is essential for an equity research analyst, as these changes can significantly impact the way you conduct your analyses and make recommendations to clients. Interviewers want to see that you are proactive in staying informed and can adapt to a changing industry landscape.

Example: “One significant regulatory change that has impacted the equity research industry is the implementation of MiFID II (Markets in Financial Instruments Directive II) in January 2018. This European Union regulation aims to increase transparency and investor protection within financial markets.

A key aspect of MiFID II affecting equity research is the unbundling of research costs from trading commissions. Previously, asset managers received research as a bundled service alongside trade execution, making it difficult to determine the true cost of research. With MiFID II, investment firms are now required to separate these costs, which has led to increased scrutiny on the value of research provided by sell-side analysts.

This shift has resulted in several consequences for the industry, including reduced research budgets, increased focus on quality over quantity, and consolidation among research providers. As an equity research analyst, staying informed about such regulatory changes is essential to adapt to evolving market conditions and maintain a competitive edge in providing valuable insights to clients.”

27. What are some challenges you foresee for the equity research profession in the coming years?

The finance landscape is always evolving, and this question aims to gauge your understanding of current trends and potential challenges facing the equity research profession. Interviewers want to know that you are not only well-versed in the industry but also forward-thinking and adaptable to changing market conditions, regulatory shifts, and technological advancements. Demonstrating your ability to anticipate and adapt to future challenges will make you a valuable addition to any team.

Example: “One of the primary challenges I foresee for the equity research profession in the coming years is the increasing reliance on artificial intelligence and automation. As these technologies advance, they have the potential to perform some tasks traditionally done by analysts, such as data collection and basic analysis. This development may lead to a shift in the role of equity research analysts, requiring them to focus more on providing unique insights and value-added recommendations that cannot be easily replicated by machines.

Another challenge is the growing emphasis on environmental, social, and governance (ESG) factors in investment decisions. Investors are increasingly considering ESG criteria when evaluating companies, which means equity research analysts need to adapt their methodologies to incorporate these non-financial aspects into their analyses. This requires staying up-to-date with evolving ESG standards and understanding how different industries and companies are impacted by various ESG issues. Ultimately, addressing these challenges will require continuous learning and adaptation to maintain relevance and provide valuable insights in an ever-changing market landscape.”

28. How do you ensure the accuracy and reliability of the information used in your analysis?

Accuracy and reliability are the cornerstones of equity research. When analyzing companies and industries, the quality of your research is only as good as the data you rely on. Interviewers want to ensure that you have a strong process in place for gathering, verifying, and cross-referencing information to minimize errors and produce solid, well-informed recommendations for investors. This question also gives you a chance to showcase your attention to detail and commitment to maintaining high standards in your work.

Example: “To ensure the accuracy and reliability of information used in my analysis, I employ a multi-pronged approach. First, I gather data from reputable sources such as company financial statements, industry reports, and government publications. This helps me establish a solid foundation for my research.

Once I have collected the necessary data, I cross-verify it with multiple sources to confirm its accuracy. For instance, if I’m analyzing a company’s earnings report, I might compare their reported figures with analyst estimates or historical trends to identify any discrepancies. Additionally, I stay up-to-date with relevant news and events that could impact the companies or industries I cover, ensuring that my analysis incorporates the latest developments.

Throughout this process, I maintain open communication with colleagues and other experts in the field, discussing findings and seeking feedback on my work. This collaborative approach not only helps validate my conclusions but also exposes me to different perspectives, ultimately enhancing the quality and reliability of my analysis.”

29. In your opinion, what qualities make a successful equity research analyst?

Assessing your understanding of the key qualities needed to excel in this role is important for interviewers. They want to see that you not only possess these qualities but can also articulate their significance in the context of equity research. Demonstrating your ability to think analytically, communicate effectively, and stay up-to-date with industry trends will show that you are well-prepared for the challenges of the job and can contribute positively to the team.

Example: “A successful equity research analyst possesses a combination of strong analytical skills and effective communication abilities. Analytical skills are essential for interpreting complex financial data, identifying trends, and evaluating the potential risks and rewards associated with investment opportunities. This includes having a solid understanding of financial statements, valuation techniques, and industry-specific metrics.

Effective communication is equally important, as analysts must be able to clearly convey their findings and recommendations to clients, portfolio managers, and other stakeholders. This involves presenting complex information in an easily digestible format, both in written reports and verbal presentations. Additionally, a successful analyst should have excellent time management skills, as they often need to juggle multiple projects and deadlines while staying up-to-date on market developments and company news.”

30. Can you provide an example of a situation where you had to defend your investment thesis against opposing views?

Your ability to defend your investment thesis is a key skill for an equity research analyst. It demonstrates your analytical prowess, your understanding of the financial markets, and your ability to communicate your ideas effectively. Interviewers want to see that you can think critically, stand by your research, and confidently present your findings—even when faced with challenging questions or dissenting opinions. This question helps them gauge your resilience, your conviction in your work, and your ability to navigate complex discussions.

Example: “During my time as an equity research analyst, I was tasked with evaluating a mid-cap technology company that had recently undergone significant management changes. After conducting thorough research and analysis, I developed an investment thesis supporting the company’s growth potential based on its new leadership team and innovative product pipeline.

However, during our internal review meeting, one of my colleagues presented a bearish outlook on the company, citing concerns about increased competition and market saturation. This led to a healthy debate among the team members, where I defended my investment thesis by highlighting the unique competitive advantages of the company’s products and the strong track record of the new management in driving growth at their previous companies.

I also provided data-driven insights into the addressable market size and demonstrated how the company could capture a larger share of it through strategic partnerships and targeted marketing efforts. Ultimately, my well-reasoned arguments and evidence-based approach convinced the majority of the team to support my bullish stance on the stock. This experience taught me the importance of being prepared to defend my investment thesis against opposing views while remaining open to constructive feedback and alternative perspectives.”

30 React Native Developer Interview Questions and Answers

30 game designer interview questions and answers, you may also be interested in..., 20 nurse technician interview questions and answers to help you prepare, 30 field worker interview questions and answers, 30 interior design intern interview questions and answers, 20 academic administrator interview questions and answers.

Equity Research Interview Questions (Top 50 With Answers)

April 14, 2019

After you get hired, it’s now time to face the equity research interviews.

Usually, it has four parts:

First screening
Interview with Human Resources
Financial Modeling tests
Interview with Equity Research Department

Usually, the fourth part is one of the difficult ones. I’m here to prepare you for it. Here are the 50 Equity Research interview questions you must get ready for.

Technical Equity Research Interview Questions and Answers

Q.1: what is contained in an equity research report.

An equity research report is a recommendation to clients which convince them to either BUY, SELL or HOLD equity securities.

The preparer must justify each recommendation. As such, the following components must be found:

Industry Overview – gives the reader a summary of the trends that affect the industry covering the company
Company Financials and Ratio – Key metrics are shown here, example: liquidity, solvency, sales turnover and market share
Valuations and Projections – based on the financial performance of the company , the research attempts to measure the future value of each share
Management Overview – Who are the management team? Are they highly qualified to run the company?
Recommendation – After a-d, the researcher will now recommend to either BUY, SELL or HOLD the security.

Q.2: What is the earnings season?

Earnings season is the time of the year, where companies declare the results of their operations. It is usually in the 2 nd quarter of each year.

Q.3: Describe the Equity Research Hierarchy

The organizational chart of equity research looks like this:

Q.4: What is the difference between Enterprise Value and Equity Value?

Equity value and enterprise value is essential when you are using valuations to find the fair value of stocks.

To compute Equity Value, we will add the following:

Equity Value – is typically the total market value of the company’s equity shares.
Enterprise Value – is Equity Value plus Net Debt.

Net Debt – is the total of short-term debt (including a portion of long-term debt), long-term debt, all non-controlling interest, preferred shares and then deduct cash and cash equivalents.

Q.5: What are the standard ratios used for company analysis?

Quick Assets Ratio – use to determine the ability of the company to pay its current liabilities using its highly liquid assets like cash, deposits and short-term investments.

Solvency Ratios – these are ratios used to measure the company’s ability to pay its financial obligations.
Current Ratio – current assets / current liabilities
Current Liability to Inventory – current liabilities/ inventory
Total liabilities to net worth – Total Liabilities / Equity

Turnover Ratios

Accounts Payable Turnover
Days Payable
Cash Conversion Cycle
Inventory Turnover
Receivables Turnover
Days Receivables
Days Inventory

Operating Efficiency Ratios

Equity Turnover
Asset Turnover Ratio
Net Fixed Asset Turnover

Operating Profitability Ratios

Return on Total Assets
Return on Equity
Dupont Model for Return on Equity
Gross Profit Margin
Operating Profit Margin

Financial Risk

Debt Service Coverage Ratio
Interest Coverage Ratio
Debt to Equity Ratio
Leverage Ratio

Q.6: What is Financial modeling in Financial Analysis?

Historical financial statements cannot give us the future value of the stocks.

Only through financial modeling that we will be able to take a glimpse of the estimated value of those shares.

The most common ways to value a company is Discounted Cash Flows and Comparable Companies analysis.

You’ll be able to find the fair value of the shares using these financial modeling techniques.

Compare those share values with the current market price to conclude.

If Market Value is lower than fair value, then BUY because the share prices are expected to go up.

Otherwise, the recommendation should be SELL or HOLD.

Q.7: How do you do a Discounted Cash Flow?

Discounted Cash Flow is a valuation method that values a company using its discounted future cash flows.

The discount rate used is the Weighted Average Cost of Capital.

Discounted Cash flows model is done generally in 6 steps:

Computed the discount rate, which is the Weighted Average Cost of Capital
Compute Free Cash Flows that is the discounted cash flows within the projected period.
Compute Terminal Value; it is equal to the discounted cash flows outside the projected period.
Computed the diluted number of shares
Compute Equity Value and Enterprise Value
Compare the estimated fair value and market value, then recommend either BUY, SELL or HOLD

Q.8: How do you do Comparable Companies Analysis?

Comparable companies’ analysis is comparing one share over other shares in the same industry using valuation multiples.

This method is being done generally on six steps.

Collect financial information about the company. This is usually composed of the three primary financial statements.
Project the income statements to 3 years, five years, or whatever length you deemed necessary.
Compute the Equity and Enterprise Value
Determine the total number of diluted shares
Compute forecasts and valuation multiples
Based on valuation multiples, compute the fair value of each share.
Evaluate results and make recommendations.

Q.9: What is Free Cash Flows?

Free Cash Flows is the cash available to debt and equity security holders after deducting all outflows related to working capital and Capex.

To compute free cash flows:

Start with the after-tax net income
Add back all non-cash expenses (because they reduced income but not cash, e.g. depreciation)
Deduct all non-cash income (because they increased income but not cash, e.g. accrued income)
A decrease in assets must be deducted because they reduce cash but do not affect net income. The opposite happens when assets increase.
An increase in payables decreases cash but does not affect net income, and so, we must deduct it. The opposite has the opposite effect.

Q.10: What is Free Cash Flow to Equity?

Free Cash Flows to Equity is the amount of cash that is available to equity shareholders after deducting all expenses related to capital outlays, debts and taxes.

Q.11: What is Sensitivity Analysis?

Sensitivity analysis is the technique to determine the effect of an independent variable on other dependent variables.

Q.12: What is the use of Sensitivity Analysis in Equity Research?

Sensitivity is used in Equity Research in a variety of ways. Instead of assuming a single scenario, a range of scenarios of factors is being investigated.

Independent variables that are often used are discount rates, growth rates or Sales.

Thus, the recommendations are not based on a single scenario but a range of scenarios that could happen considering their possibility ratios.

Sensitivity analysis is presented using a sensitivity analysis table through DATA tables in Excel.

Q.13: What are the common valuation multiples used in Equity Research?

Price Earnings Ratio
EV / Assets
Price-Earnings Growth Ratio
Price / Book Value

Q.14: How do you compute the Weighted Average Cost of Capital for Discounted Cash Flows?

Q.15: what is the difference between a training pe and a forward pe.

Trailing PE Ratio is computed using the financial figures of the past period (usually a year).

On the other hand, a forward PE is a ratio calculated using projected data (usually one year ahead).

Q.16: What is BETA?

Beta is the measure of a stock price’s sensitivity to changes in the stock market. This is derived using historical figures using regression analysis.

A beta of 1 means that it moves equally proportionated to the movement of the stock market.

A beta lower than one means that it is less volatile, or less movement than the stock market movement.

A beta is higher than 1 means that its price is more volatile than the market.

Q.17: Which is better between EBIT and EBITDA?

The issue should be which one is more interesting to decision-makers.

The only difference between the two is that EBITDA is after depreciation and amortization, unlike EBIT.

If the depreciation and amortization are very significant, decision-makers most likely consider using EBITDA.

Q.18: What are the disadvantages of using the Price-Earnings Ratio?

a . It is too simple . Aside from current price and net income, it doesn’t take into account other factors that could affect the fair value of the company.

Price-Earnings need other multiples to have meaning.
PE Ratio does not take into account growth.
PE Ratio doesn’t consider debt

Q.19: How does oil price changes affect our economy?

Oil and other petroleum products are the main inputs in most of our industries.

Increasing oil prices will increase the costs of producing products and services, especially in the manufacturing and transportation sectors.

On the micro-level, increases in oil prices decrease a household’s spending power.

It also dramatically reduces a company’s ability to pay, especially organizations that are heavily reliant on gasoline (e.g. bus companies)

On the macro level, oil price increases tend to reduce economic growth and increase inflation.

Q.20: Suppose your grandma’s broker told her to SELL already here Apple stocks, how would you react to this?

I’ll first ask my grandma to tell her broker to send her an equity research report.

I’ll explain to my grandma each part of that report (assuming she doesn’t know yet), and how it could affect her decision of buying, holding or selling stocks.

I’ll take a look at the equity research report, and if I see something off, I’m going to do further research on my own.

If time permits, I’ll even do comprehensive research for my grandma.

Q.21: How do you value a stock?

There are a lot of ways to value a stock. The most common is to use Discounted Cash Flows.

Discounted cash flows use the future cash flows of a company to determine the current fair value of a stock.

We can also use multiples to value a company.

We use relative valuation methods such as Comparable companies analysis and the Precedent transaction valuation method.

Q.22: If a company has a higher Price-Earnings ratio than another company, what could be the reason?

The formula for Price-Earnings ratio is:

Based on this formula, the PE ratio could go higher if the Price per share is high relative to earnings per share.

Price per share is high if investors assess that the growth potential of the company is high. As such, they will also value the shares higher in the market.

Q.23: What can you imply with a company that has a low PE multiple but a high EV/EBITDA multiples?

The difference between the two multiples is Net Debt.

Net Debt is the total of short-term debt (including a portion of long-term debt), long-term debt, all non-controlling interest, preferred shares and then deduct cash and cash equivalents.

As such, the difference in the multiples means that eh company has a significant amount of net debt.

Q.24: Why is it sometimes necessary to unlever a beta?

To unlever a beta means that to remove the effect of debt of the company to the movements of the stock’s price.

Unlevering data means that you only want stockholder’s equity to affect it.

Unlevered beta is assumed to be a more accurate measure of a stock’s volatility due to the removal of the effect of debt securities.

The beta you get from tools like Bloomberg is levered data.

Unlevered data is computed by:

Un-Levered Beta = Levered Beta / (1 + ((1 – Tax Rate) x (Total Debt/Equity)))

Q.25: Is it possible for a stock to have an Equity Value that is higher than its Enterprise Value?

Yes. Based on the formula Enterprise value = total equity market value + Gross Debt less Cash, Equity value is higher when it has no interest-bearing debt but have cash.

Q.26: What is the disadvantage of Discounted Cash Flows?

DCF cannot be used when the analyst cannot reliably forecast the cash flows of the company.

This usually happens when the company is just in the beginning, and do not have stable operations yet (e.g. Tech start-ups)

Q.27: Based on Warren Buffett, why are EBIT multiples more preferable than EBITDA multiples?

This is what Warrant Buffett says about EBIT vs EBITDA.

“Does management think the tooth fairy pays for capital expenditures?”

“It amazes me how widespread the use of EBITDA has become. People try to dress up financial statements with it.”

“We won’t buy into companies where someone’s talking about EBITDA.

If you look at all companies and split them into companies that use EBITDA as a metric and those that don’t, I suspect you’ll find a lot more fraud in the former group.

Look at conglomerates like Wal-Mart, GE, and Microsoft — they’ll never use EBITDA in their annual report.”

Including depreciation and amortization is a less accurate value of the company.

For example, the depreciation of an aging factory is not a factor in the current fair value of a stock.

Q.28: Why do we use 5-10 years as the projection period for Discounted Cash Flows?

The reason is that of the relevance and usability of the report. Less than five years is a relatively short measure of the future of the company.

It will be hard to look in the long-term if you are looking at less than five years’ projections.

On the other hand, the projection of more than ten years is already too far ahead.

There are already a lot of unseen factors that could affect the company in more than ten years.

Q.29: What is the discount rate used in Discounted Cash Flows?

The most common discount rate used in DCF is the Weighted Average Cost of Capital (WACC).

WACC is composed of Cost of Debt, Cost of Preferred Shares and Cost of Common Shares. As such, you will need to compute three items.

Q.30: How do you compute the terminal value in a Discounted Cash Flow?

Terminal value is the present value of all cash flows beyond the projected period. It is commonly computed using the Gordon growth model or using exit multiples.

Q.31: What is a mid-year convention in Discounted Cash Flows?

Midyear convention is DCF is used to reduce the effect of assuming cash flows are done at the end of the year.

Midyear convention assumes that cash flows are done in the middle of the year instead of at the end of the year.

As such, instead of using discount rates of 1 for the first year, 2 for the second year, etc., the analyst uses 1.5, 2.5 and so on and so forth.

Q.32: Pitch me a stock.

This is a sell-side pitch, meaning you want the person to buy the stocks. As such, you need to highlight the strengths so that he’ll buy them.

You’ll need to have the following in advance so that you can make a successful pitch during an interview:

A company of your choice. You must completely agree that this company’s stock price is going up.
An equity research report you made
Valuations, Models, Ratios that will support your pitch

Q.33: Tell me about a company that you admire, and that makes you buy a significant amount of its stocks.

This is similar to “pitch me a stock”, so you’ll do the same.

Prepare in advance an equity research report you made along with all your justifications (valuations, etc.).

You might also want to highlight the strength of the management, the industry or the products of the company.

Q.34: Suppose you have USD$1M, how would you invest it?

This question has a very high chance of being asked, and so, you must be ready.

You can even prepare a portfolio mix through Excel, which you can show the interviewers.

Should you just include stocks? No. Include fixed income securities as well because your target is to diversify your assets.

Ideally, your portfolio mix is one that is considered quite risky. Why? Because you are a sophisticated investor given your advanced knowledge in financial instruments.

This kind of combination has stocks as the most significant percentage, followed by corporate bonds and then government bills.

Q.35: What is the difference between Fundamental Analysis and Technical Analysis?

Both are methods to analyze and project future prices of stocks.

Fundamental analysis uses extensive analysis of financial statements, non-financial data and external factors to determine the future price of the stock.

Technical analysis is merely analyzing the stock chart in an attempt to find trends and patterns that will determine the future value of the stock.

Now, below you will read about non-technical Equity Research Interview Questions

Non-Technical Research Analyst Interview Questions

Q.36: how much does money motivate you in your career.

The amount of money especially, the number of salaries motivate me in such a way that I can live comfortably with a higher wage, that’s why I went to finance, notably investment banking .

However, it’s not the one thing which composes the 100% of my motivation. In this early part of my career, I highly value having a company and a manager that will guide me and make me leap to the next level of my career .

Q.37: What keeps you motivated?

“New learnings and new experiences. I’m motivated that every I get to learn new things and that someday I’ll be respected equity research professional.”

Q.38: Do you consider leaving your job in the future to start your own company?

The employer wants you to hearsay NO to this question.

“I’m currently enjoying all that’s happening to my career right now.

I’m good with the fact that I am under the tutelage of experienced senior professionals.

At the same time, I am happy that I am under the wing of an established company.

I don’t have to think about the ‘operations’ side of things and focus only on equity research itself.

Q.39: In equity research, what is the difference between analysts and associate?

In a firm or department, analysts have higher positions than associates.

Analysts have the responsibility of checking and reviewing the work of associates, before submission to senior analysts or equity research head.

This is in contrast to investment banking where associates have higher roles than analysts.

Q.40: What skills are needed in equity research?

Q.41: what is a restricted list in equity research.

The restricted list is a list of shares that the research firm is not allowed to report based to avoid conflicts of interest.

The most common basis of this is when the investment banking arm of the same company is working on an IPO of that company.

Q.42: How do you explain equity research to a 5-year old kid?

Equity research is a career where adults advise adults about whether it’s good to buy a goodie.

That goodie is good to buy when after some months that goodie is going to be worth higher.

For example, a goodie now is worth $1.

The equity researcher will do his work and then realizes that the goodie will be $2 after six months.

He will then tell other adults to buy that goodie for $1 now and then sell it after six months for $2.

And so, the adults will get $2 instead of having just$1.

To gain a deeper understanding, read this step-by-step guide on equity research career .

Q.43: What is the difference between sell-side and buy-side equity research?

Sell-side and equity side in research refers to the motives of clients for buying stocks.

Sell-side firms buy and sell shares to earn from fluctuations in stock prices.

Sell-side firms include investment banks , commercial banks, stockbrokers, market makers, and private firms.

Buy-side entities buy stocks to add to their investments. They earn by growing that company and then exiting when the share prices are already favourable.

Buy-side firms include asset management firms, hedge funds , institutional and retail investors.

Q.44: Why Equity Research and Are you prepared for stressful work?

Before I decided to be an equity researcher, I already knew that this is a very tough job.

I know for sure that there would be long working hours and various deadlines throughout the day.

To get me ready for it, I improved my skills so that I can work even faster.

For example, I memorized a lot of Excel shortcuts so that I can save time. I also make sure that I know the valuation methods by heart.

I also practised writing reports so that it would be easier for me when I’m already on the job.

I hope you’re enjoying this list of Equity Research Interview Questions?

Q.45: What does an Equity Research associate do?

They usually maintain files of companies under the sector they are assigned to.

They provide a fundamental analysis of those companies consistently. They develop financial models, industry analysis and sector databases.

They must always be in-the-loop in terms of news related to the industries and sectors they cover. This is very crucial as it is part of their fundamental analysis.

They assist the heads in publications of research reports.

Q.46: What does an Equity research Head do?

The head of equity research provides support and leadership to achieve goals and strategies set by the brokerage firm.

They ensure that all pricing is estimated based on best practices.

They supervise the publication of research reports, as well as recommendations for both internal and external use.

They also usually talk with other brokerage firms, research consultants, equity research analyst, portfolio manager, or fund managers.

Q.47:Some firms do have Senior Analysts, how do they support the Equity Research Head?

They coordinate research reports before releasing for publication.

As such, they provide notes, additional texts, comments, reports or edits to the research reports submitted by associates.

They are also the ones who coordinate or regulate the distribution of research products, ensuring that all legal or company policies are being followed.

Because of this, they must have a high level of knowledge of regulatory functions together with their finance knowledge.

Q.48: What is MiFID II?

What is MiFID II?

MiFID 2 (Markets Financial Instruments Derivative 2) is legislation by the European Union (EU) that will increase the integrity of European markets, protect investors from biased research reports and improve the competitiveness of the financial markets.

MiFID II affects different financial markets such as stock, fixed income, currency, futures and forwards and derivatives markets.

Q.49: How does MiFID II affect the equity research profession?

Like others, this question is also essential, so we included in our list of Equity Research Interview Questions

Among the provisions of MiFID II is the disallowance of giving free equity research reports.

Such reports are usually, technically, are paid as part of the brokerage fee. As a result, firms can only get paid if they can broker stocks.

There could be a tendency to create the report in such a way that it will entice the reader to buy.

This bias is what MiFID II is trying to avoid.

As such, research reports and brokerage fees would now be unbundled, meaning, paid separately.

Because of this change, this could significantly lower the number of clients of equity research, as a lot would not opt to pay for the reports. Some equity research firms are planning to cut employees.

There would be less working opportunities in equity research.

On the other hand, it could improve equity research reports because of the unbundling of services.

Q.50: What are some soft skills in Equity research that you think you’ll significantly need?

Report Writing Skills
Accounting Skills
Excel Skills
Financial Valuation and Modeling

I hope you find this guide helpful about Equity Research Interview Questions that includes 50 (Technical as well as Non-Technical equity research interview questions with complete answers).

Download BIWS Course sample videos here .
Read Students’ Testimonials here .

Avadhut is the Founder of FinanceWalk. He enjoys writing on Finance Careers topics. Check our Financial Modeling Courses . Contact us for Career Coaching based on Your Inner GPS.

All FinanceWalk readers will get FREE $397 Bonus - FinanceWalk's Prime Membership.

If you want to build a long-term career in Financial Modeling, Investment Banking, Equity Research, and Private Equity, I’m confident these are the only courses you’ll need. Because Brian (BIWS) has created world-class online financial modeling training programs that will be with you FOREVER.

If you purchase BIWS courses through FinanceWalk links, I’ll give you a FREE Bonus of FinanceWalk's Prime Membership ($397 Value).

I see FinanceWalk's Prime Membership as a pretty perfect compliment to BIWS courses – BIWS helps you build financial modeling and investment banking skills and then I will help you build equity research and report writing skills.

To get the FREE $397 Bonus, please purchase ANY BIWS Course from the following link.

Breaking Into Wall Street Courses - Boost Your Financial Modeling and Investment Banking Career

To get your FREE Bonus, you must:

Purchase the course through FinanceWalk links.
Send me an email along with your full name and best email address to [email protected] so I can give you the Prime Bonus access.

Click Here to Check All BIWS Programs – Free $397 Bonus

Get new posts by email

How To Do Equity Research: An Actionable Guide

ContentsTechnical Equity Research Interview Questions and AnswersQ.1: What is contained in an Equity Research Report?Q.2: What is the earnings season?Q.3: Describe the Equity Research HierarchyQ.4: What is the difference between Enterprise Value and Equity Value?Q.5: What are the standard ratios used for company analysis?Q.6: What is Financial modeling in Financial Analysis?Q.7: How do you do a Discounted Cash Flow?Q.8: How do you do Comparable Companies Analysis?Q.9: What is Free Cash Flows?Q.10: What is Free Cash Flow to Equity?Q.11: What is ...

October 8, 2023

Equity Research Course: 10+ Lessons | Download XLS Free

September 22, 2023

Equity Research Careers Guide – The Best Career Guide

January 24, 2019

How to Do Industry Analysis: Follow this 6-Step Process Model

October 17, 2016

Equity Value Vs Enterprise Value: The Best Comparative Guide

FinanceWalk

Reach out to us for a consultation. career coaching based on your inner gps., blog categories, navigations.

Equity Research Interview Questions

The most important interview questions for Equity Researchs, and how to answer them

Getting Started as a Equity Research

What is a Equity Research
How to Become
Certifications
Tools & Software
LinkedIn Guide
Interview Questions
Work-Life Balance
Professional Goals
Resume Examples
Cover Letter Examples

Interviewing as a Equity Research

Types of questions to expect in a equity research interview, technical questions, market insight and industry-specific questions, modeling and forecasting questions, behavioral questions, stock pitch and investment thesis questions, current events and news analysis questions, stay organized with interview tracking.

Preparing for a Equity Research Interview

How to do interview prep as an equity research analyst.

Understand the Firm and Its Coverage Universe: Research the firm's focus areas, the sectors and companies it covers, and its investment philosophy. Knowing the firm's top picks and recent research reports can provide valuable context for your discussions.
Master Financial Modeling and Valuation: Be prepared to discuss and demonstrate your proficiency in financial modeling, DCF, comparable company analysis, and precedent transactions. You may be tested on these skills during the interview process.
Stay Current with Market Trends: Have a solid grasp of current events and understand how they affect the markets and your sector of interest. Be ready to discuss recent news and its potential impact on the stocks you may be covering.
Prepare to Pitch a Stock: You may be asked to pitch a stock during your interview. Choose a company you are familiar with, prepare a thorough analysis, and be ready to defend your investment thesis with confidence.
Analyze the Firm's Recent Reports: Reviewing the firm's recent publications will give you insight into their reporting style and the metrics they emphasize. This can guide you in aligning your approach to their standards.
Practice Behavioral and Technical Questions: Be ready to answer behavioral questions that explore your past experiences and work ethic. Also, prepare for technical questions that test your industry knowledge and analytical skills.
Develop Insightful Questions: Prepare thoughtful questions that demonstrate your interest in the role and your understanding of the equity research field. This can also help you assess if the firm's culture and values align with your career goals.
Engage in Mock Interviews: Practice with mentors, peers, or through mock interviews online. This will help you refine your delivery, manage interview nerves, and receive constructive feedback on your performance.

Equity Research Interview Questions and Answers

"how do you approach building a financial model for a new company you are analyzing", how to answer it, example answer, "can you discuss a time when you had to defend your investment recommendation against criticism", "how do you stay current with market trends and industry news", "explain how you would value a company that is not currently profitable.", "what are the most important financial ratios to analyze in your sector, and why", "describe a time when you had to analyze a company with limited public information available.", "how do you assess the impact of macroeconomic factors on the companies you cover", "can you walk me through a time when you had to revise an investment thesis", which questions should you ask in a equity research interview, good questions to ask the interviewer, "can you describe the firm's investment philosophy and how the equity research team contributes to it", "what are the key challenges facing your equity research team, and how does the firm plan to address them", "how does the firm support ongoing learning and professional development for its equity researchers", "could you share an example of a recent analysis or project that the team undertook and the impact it had on investment decisions", what does a good equity research candidate look like, financial acumen, industry expertise, analytical and critical thinking, communication skills, attention to detail, regulatory and ethical standards, adaptability and continuous learning, interview faqs for equity researchs, what is the most common interview question for equity researchs, what's the best way to discuss past failures or challenges in a equity research interview, how can i effectively showcase problem-solving skills in a equity research interview.

Equity Research Job Title Guide

Related Interview Guides

Driving financial strategies, analyzing market trends for business profitability

Navigating financial landscapes, maximizing client wealth through strategic investments

Navigating business uncertainties, safeguarding assets through strategic risk mitigation

Navigating tax complexities, ensuring compliance while maximizing client savings

Driving financial strategies, analyzing trends to optimize business profitability

Driving financial health and growth, steering company's fiscal decisions and strategies

Start Your Equity Research Career with Teal

9 Equity Research Interview Questions With Answers

Q1- tell me is there any possibilities terminal value can be negative.

Suggested Answer: It is theoretically possible, but not in practice. The terminal value of a company is the value of its expected free cash flow after the period covered by the explicit projected financial model.

Terminal Value = (FCFF x (1+Growth Rate))/(WACC - growth rate)

If, for some reason, the WACC is less than the growth rate, the terminal value may be less than the growth rate.

Q2- Why PE ratio high of a tech company is higher than the PE of a mature company?

Suggested Answer: Moreover, it can be demonstrated that the Price-Earnings multiple is driven by the ratio (1–g/ROE) / (r– g), where r represents the cost of equity, g represents the growth rate, and ROE represents the return on equity. A high-tech company's price-to-earnings ratio (PE) may be higher because investors expect the stock to grow more rapidly.

Q3- Explain me about your investment philosophy and how you look your own investment strategy?

Suggested Answer: According to what I want to accomplish for myself, my investment strategy is different each time.

When used in conjunction with a large number of derivatives and options, it can be a very aggressive investment strategy; when used in conjunction with a long-term investment strategy, it is much more conservative. If I want to earn a 30 percent return in three months, or a 5 percent return per year for five years, the underlying strategies must be distinct. The basic rule is to look for high-quality companies or funds with strong management and balance sheets that are in a growing industry, and then to hold onto them for a minimum of five years after discovering them.

Q4- Suppose you analyze a listed company and you have to find deep detail of the company then what you question will be with yourself?

Suggested Answer:

Is the management team delivering on their promises on a consistent basis?

Is there a clear plan for the future in place from the top down at the company?

Is the management team up to the task of dealing with the crisis?

Is the management team putting together the best possible product mix?

Is the management reliant on a small number of products and a small number of clients?

Is the management spending enough money on research and development?

Is there anything the management is doing to keep their best employees?

Is the management team allocating their resources wisely to new products and business expansion?

Is the management team prepared to accept the changes and challenges that lie ahead?

Is the management team more concerned with the bottom line or the margins?

Is the management team focusing on temporary solutions or on long-term solutions for a specific problem?

Is their business module a long-term, financially viable component? Does the company's management distribute its profits to its stockholders? Is the company's management communicating with its stakeholders and providing them with reassurance if the company is struggling? Is the company's management open and transparent?

Q5- Imagine you attend a earning call What questions you would ask a company management?

Suggested Answer: It all depends, but I'll ask some questions like, for example,

What is the most beneficial use of the cash on the balance sheet of the company? Is there a plan in place for the company to raise capital in order to fund future growth?

When it comes to sales, where do you see them heading in the next 12 to 24 months?

When it comes to your industry, who are the up-and-coming competitors you should be looking out for.

Q6- Tell me between EBIT and EBITDA, which is better?

Suggested Answer: Because depreciation and amortization are non-cash expenses, they are excluded from EBITDA calculations. Alternatively, the cost of debt and its tax consequences. As a result, EBIT is superior.

Q7- Imagine you are facing conﬂict with a colleague and other team member and how you deal with it?

Suggested Answer: I understand that different people have varying points of view, which can lead to miscommunication and conflict between people. The direction of the project was determined after we each explained our respective perspectives and thought processes to one another. When it comes to conflict resolution, communication is essential.

Q8- What factors affect price of copper?

Suggested Answer: Copper is used extensively in our industrial production, and copper wire has a significant impact on the telecommunications industry as well.

Copper's price is influenced by a number of important factors.

Situation of the World's Economy

Copper consumption is primarily concentrated in the industrialized countries of the world. A greater influence on copper prices is exerted by the economic conditions of these countries such as the United States, Japan, Western Europe, and other countries.

Seasonal Variables The price of copper fluctuates according to the season. Typically, the lowest copper price is reached in January, and the highest price is reached in August.

Q9- Is EBITDA a good proxy for cash flow?

Suggested Answer: With the exception of capital-intensive industries such as oil and gas, EBITDA is positive.

Equity Research Interview Question With Answers- Intermediate Level

Asset Management Sector Equity Research Interview Questions

Equity Research Real Estate Sector Interview Questions

X (Twitter)

Join 307,012+ Monthly Readers

Get Free and Instant Access To The Banker Blueprint : 57 Pages Of Career Boosting Advice Already Downloaded By 115,341+ Industry Peers.

Break Into Investment Banking
Write A Resume or Cover Letter
Win Investment Banking Interviews
Ace Your Investment Banking Interviews
Win Investment Banking Internships
Master Financial Modeling
Get Into Private Equity
Get A Job At A Hedge Fund
Recent Posts
Articles By Category

Equity Research Recruiting: The Definitive Guide

If you're new here, please click here to get my FREE 57-page investment banking recruiting guide - plus, get weekly updates so that you can break into investment banking . Thanks for visiting!

Numi Advisory is an expert in the field of Equity Research Recruiting, having advised over 600 clients by providing career coaching, mock interviews, and resume reviews for people seeking jobs in equity research, private equity, investment management, and hedge funds (full bio at the bottom of this article).

So, you’re interested in the public markets…

You’ve been trading your own portfolio and making investment recommendations since you were in middle school…

…and now you’re at a top university preparing to enter the finance industry.

You’re probably wondering: Is equity research right for you?

Or will it go the way of the dodo bird, driven to extinction by MiFID II, passive investing, and falling trading commissions?

We’ll address those questions and more in this article, but we’ll focus on equity research recruiting and interviews – since the industry is still alive, despite rumors to the contrary:

The Equity Research Job Description

“Equity research” in this article refers to the sell-side role at investment banks where you analyze public companies, speak with management teams and investors, and make Buy, Sell, and Hold recommendations on the stocks.

For example, you might cover the pharmaceutical industry in equity research at a mid-sized bank.

There’s a company that recently went public, and you believe it is undervalued.

You value the company, speak with management and other market participants (ex: institutional investors), and then you explain why the company’s stock price might increase from $100 to $150 over the next year, using the research and quantitative analysis you’ve done.

You then publish a report with your findings, and you also present them to institutional investors who read your research.

Now, repeat this process with 10-15 other companies in the sector, add update/maintenance work, conferences, and continued discussions with management and investors, and you’ve got the gist of the job.

This role is labeled “sell-side” because you do not invest your own money; you simply make recommendations to others.

If you predict that a company’s stock price will rise by 30%, but then it falls by 30% instead, you might look silly – but you won’t lose money.

Research teams are best known for the reports they publish, but the senior staff (“Research Analysts”) in these groups spend most of their time speaking with management teams and institutional investors and coming up with insights into the stocks under coverage.

Junior staff (“ Equity Research Associates “) spend more time on the modeling and report writing, but the work split varies by team, industry, and location.

Equity Research Reports – Examples

If you want to see real examples of these reports, you can often find them through brokerages such as Fidelity, Charles Schwab, or TD Ameritrade, as well as services such as Capital IQ, Bloomberg, or FactSet, if you have access to one of them.

Here are a few real reports issued by banks in different time periods and industries:

Morgan Stanley – Update on Lululemon Athletica
Morgan Stanley – Initiating Coverage on Citizens Financial Group
RBC – Initiating Coverage on Waddell & Reed Financial
Lehman Brothers – REIT Sector Overview
Lehman Brothers – Initiating Coverage on CBS Corp

And if you want imaginary-but-shorter-and-more-useful examples, check out our article on Equity Research Reports .

We include sample research reports in most of the BIWS financial modeling courses as well, typically in the valuation/DCF case studies.

Equity Research & MiFID II: The Death of an Industry

The most common question we get about equity research is whether or not it’s “dying.”

In the old days, equity research existed to encourage institutional investors to trade with the bank.

Investor A might place stock trades with Bank B, resulting in commissions for Bank B, and Bank B would provide equity research reports to Investor A “for free.”

This research would then incentivize Investor A to place even more trades with Bank B (in theory).

The commissions generated by Investor A would then contribute to the compensation of the research team at Bank B (in theory).

As of 2018, this has changed in the European Union because of the new MiFID II regulations there.

MiFID (“Markets in Financial Instruments Directive”) II does a lot , but the main provision that affects equity research is the one that prohibits banks from bundling their research with other products .

So, instead of receiving research “for free,” institutional investors must pay for it separately, disclose the amount they paid, and pass the cost onto their investors or absorb it on their P&L.

Technically, MiFID II only applies to Europe, but it will make an impact on other regions because large banks are global corporations that must consider compliance everywhere – and similar rules could eventually take effect in the U.S., Asia, and other places.

If you look around online, you’ll find a wide variety of opinions: Some people think these regulations will completely kill equity research in Europe, others think they will help the “star” Analysts and hurt everyone else, and others think the impact might be overstated.

The truth is, it’s too early to tell because the rules were only implemented in January 2018. But the industry will almost certainly decline; it’s just a question of degree.

But the other truth is that equity research is affected by more than MiFID II – headcounts had been falling even before these rules came into effect.

The rise of passive investing has hurt traditional asset managers and hedge funds, and that, in turn, has also hurt demand for equity research.

Commissions from equities trading have been falling, and sales teams have been shrinking, and those make a strong impact on research as well.

We doubt that the industry will “disappear” because the client interactions and management meetings that the best Analysts and Associates can broker are still quite valuable.

However, many average Analysts are likely to be marginalized, while the top ones will command higher compensation.

The bottom line is that equity research will not be an area of explosive growth going forward, but its prospects are less apocalyptic than many headlines suggest.

Research will still offer entry-level roles, and it can still be a good steppingstone for various exit opportunities, but it is less appealing as a long-term career now.

The Equity Research Recruiting Process

The equity research recruiting process is more random and unstructured than the investment banking recruitment process .

The large banks may do some undergraduate and MBA-level recruiting, but they fill many of their spots “as needed” – if an Analyst or Associate leaves, they’ll look for someone new.

They look for the standard qualities that bankers also seek: A well-ranked university or business school, high grades, at least 1-2 previous finance internships, analytical ability, and technical skills.

The main difference is that you must demonstrate your passion for the public markets because that is the major distinction between ER and IB.

That means coming up with 2-3 excellent stock pitches, following an industry in-depth, and taking part in equity research competitions such as those sponsored by the CFA Society .

In theory, it’s helpful to intern at small hedge funds or asset management firms before applying to ER roles at large banks.

In practice, it’s often quite difficult to find those roles, so it might be better to apply to equity research at smaller firms and then move to larger banks from there.

Investment banking or private equity internships could also work, especially if you win an offer at a large, well-known firm, but they’re a bit less relevant.

Another recruiting difference is that writing and communication skills tend to be more important in equity research because you have to present your own ideas consistently.

While you also write a fair amount in IB to create CIMs (for example), much of it is mundane and consists of copying and tweaking text from other sources.

By contrast, research requires more originality.

Equity research teams sometimes recruit candidates with significant full-time work experience , especially in industries where deep technical knowledge is required to understand the companies: Biotech, pharmaceuticals, or semiconductors, for example (see: our full coverage of biotech equity research ).

In those industries, you’ll occasionally see Ph.D.’s or industry executives move into equity research – assuming that they’ve learned enough about finance to do the job.

Some people also move into ER from the corporate finance career path at normal companies, Big 4 firms , or even data providers like Thomson or FactSet, particularly at boutique and mid-sized firms.

Since equity research recruiting is less structured, it’s more feasible to get in through the side door or the back door.

Equity research internships do exist, but they’re somewhat different from IB and S&T internships and do not necessarily lead directly to full-time offers.

It’s hard to pin down the timing of the ER recruiting process, but it’s safe to say that it’s not quite as hyper-accelerated as the IB recruiting process .

You’ll still go through first-round interviews, often on the phone or via video, and then proceed to Superday interviews at the bank.

Finally, studying for the CFA and passing at least Level I will boost your profile when applying to equity research roles.

However, it shouldn’t be your top priority unless you’re already solid in everything else – grades, work experience, networking, technical preparation, and stock pitches.

The CFA can also be helpful if you’re coming from a non-finance background and need to prove that you know finance.

Equity Research Networking

As always, you start the networking process by finding the email addresses of industry professionals.

You can do that by searching for anyone working in “Equity Research” on LinkedIn and guessing their email addresses, or you can go through services like Bloomberg, Capital IQ, or FactSet if your school provides access.

Old equity research reports also have contact information, and some bank websites list email addresses and phone numbers for ER staff.

To verify that an email address still exists, you can use tools such as Email Checker .

It’s best to focus on groups with specific job openings, but you won’t always know that in advance.

Once you’ve collected names and email addresses, you can write a 5-6-sentence email like the one below to an Analyst or Associate:

SUBJECT: [University Name] Student – Opportunities at [Bank Name]

“Dear Mr. / Ms. [Name],

My name is [Name], and I’m a [XX-Year] student at [University Name] who found your contact information via LinkedIn.

Over the past few years, I’ve become increasingly interested in equity research as a career, and I have been learning as much as possible to break into the field.

I have completed previous internships at [Company Name 1] and [Company Name 2], two hedge funds focused on long/short equity strategies in the technology sector. I’m specifically interested in your team because of the technology companies you cover, such as [Company Names 1 and 2].

I’ve attached here an example stock pitch (and the accompanying model) I completed for [Company Name], as well as my resume.

I know you are extremely busy, but if you have a few minutes to speak so I could learn more about opportunities at [Bank Name / Group], it would be greatly appreciated.

Thanks, and I look forward to connecting with you soon.

Best regards,

[Your Name]”

A few notes:

Length: Aim for 150 words and never go above 200. If you write a page of text, no one will read it or respond.
Timing: Avoid contacting ER professionals during earnings season, and, as with all email networking , send your messages in the middle of the day (between noon and ~1 hour before market close).
Directness: This email does not request an informational interview – the person asks about jobs and attaches his/her resume and work samples. Since ER has a less structured recruiting process, you should ask directly for the internship or job when you know the team is hiring.

Some people recommend against attaching work samples in your initial outreach.

If you don’t know how to value a company, structure a stock pitch, or present your ideas coherently, then you should take this advice and avoid sending work samples.

But if you don’t know how to do these things, you shouldn’t be participating in equity research recruiting in the first place!

If you have a solid 3-statement model, valuation, and investment thesis, a work sample should help you 90% of the time.

For more on this topic, see our equity research report examples .

Once you’ve made this initial outreach, you need to follow up and contact other teams using the same approach until you get positive responses.

Equity Research Interview Questions and Answers

Many of the standard “fit” questions will come up in equity research interviews: Your story, strengths/weaknesses, why equity research, team/leadership experiences, etc.

We covered these questions from an investment banking perspective in previous articles , but you can use nearly the same format and structure for ER interviews as well.

You need to emphasize your interest in the public markets and your communication skills more heavily, and you need to explain why you want to work in sell-side research if you have previous buy-side internships.

For example, you prefer research because you do modeling, research, and writing, and you also speak with investors and management teams. You like the relationship-building aspect, which you don’t necessarily get as much of at a hedge fund.

The “Why equity research?” question is just the last part of your response to the “ Walk me through your resume ” question: ER lets you combine your industry background with the public-markets analysis you enjoy.

Technical questions are largely the same in ER and IB interviews , so you should expect questions on accounting, valuation/DCF analysis, and M&A and LBO analysis.

You don’t work on deals in research, but you still need to understand them because the companies you follow will make acquisitions or be acquired over time.

The Equity Research Stock Pitch

The stock pitch is a separate topic that we covered in a detailed article, so you should refer to that for ideas and examples.

You should come up with one “Buy” and one “Hold” or “Sell” idea and avoid stocks the interviewer covers directly.

You will never know more about a company than an Analyst or Associate who follows that company for 12 hours per day, so you set yourself up for disaster if you pick a company they cover.

It’s better to pick stocks in “adjacent” industries so that the interviewer has some familiarity with them, but not deep knowledge.

For example, if you’re interviewing with a consumer/retail group , pitch a food & beverage stock – the industries are related, but the interviewer is unlikely to know your company in-depth.

If you’re writing your stock pitch, you can use the same structure we always recommend:

Recommendation – Buy/Sell/Hold and what the company is worth.
Company Background – Brief description of the company’s products/services/geographies, its revenue and EBITDA, market cap, and relevant valuation multiples.
Investment Thesis – The company is mispriced because of these 2-3 key factors, and the market is wrong about these points for these 2-3 reasons.
Catalysts – And key events in the next 6-12 months will cause the company’s stock price to correct itself.
Valuation – According to the DCF and Public Comps, this company is worth $XX – $YY per share, but its current share price is $ZZ.
Risk Factors and Hedges – We might be wrong for these 2-3 reasons, so we could protect ourselves with other investments, call or put options, etc.

You can use this same structure in a verbal pitch, but you’ll only have 60-90 seconds to present everything.

That equates to 200-300 words , about the same as our recommended word count for your story . So, you can’t go into the numbers in-depth and explain every last point.

Here’s an example 281-word verbal pitch for a REIT:

“AvalonBay, a U.S.-based multifamily REIT, currently trades at $165 per share, but it is worth closer to $190-$200 per share and could reach that level in the next 6-12 months. The company focuses on Class-A properties on the coasts of the U.S. and has $2.2 billion in revenue, $1.3 billion of EBITDA, and EV / EBITDA and P / FFO multiples of 22x and 20x.

The market has incorrectly penalized the company for several earnings misses in its last fiscal year and expectations of rising interest rates and a coastal multifamily slowdown; however, rising interest rates barely affect the company because 83% of its Debt is fixed-rate with 10-year maturities, and even in downturns, its rental income has never declined by more than 2% per year.

The company will be able to raise same-store rents above consensus estimates and realize more NOI from its Development pipeline than the market has given it credit for; Year 5 revenue might be 10-15% higher.

Catalysts to increase the company’s share price include the stabilization of its $1.9 billion in deliveries last year, at a 6.0% – 6.5% yield, same-store rental increases above guidance, and expansion into new markets such as Denver, South Florida, and Baltimore.

The NAV and DCF indicate that the company is 20-30% undervalued in the Base and Upside cases, and only 10% overvalued in the Downside case with a 2-year recession. It trades in-line with the Public Comps’ median multiples despite 2-3x higher EBITDA and FFO growth.

Risk factors include a coastal multifamily recession, development delays and lower yields, and lower NOI margins due to rising concessions; we could hedge against these risks with put options or by shorting a multifamily ETF.”

NOTE : For more on these topics, see our free videos on Comparable Company Analysis and Unlevered Free Cash Flow in our YouTube channel.

There is no “quick” method for creating solid stock pitches.

You need to put in the time to research an industry, get to know different companies, and understand how the market values companies.

If this process bores you, you should not apply to equity research, asset management, or hedge fund roles.

Equity Research Case Studies and Modeling Tests

Finally, some groups will give you case studies or modeling tests when you apply to equity research roles.

In most cases, these will be 3-statement modeling tests for public companies, similar to the example modeling test on this site .

Occasionally, they may ask you to value the company as well; M&A and LBO-related tests are unlikely for ER roles.

We prefer annual models, but research groups often use quarterly or half-year models, so you should practice with those as well .

The most common mistake in these tests is over-thinking the model and creating overly complex assumptions.

When in doubt, simplify, consolidate, and focus on the 2-3 key drivers that make the greatest impact on Free Cash Flow.

We often simplify complex Balance Sheets and Cash Flow Statements to ~5 or fewer line items in each section because many items are insignificant or non-recurring.

For an example of a valuation and model you could use to construct a stock pitch or complete one of these tests, see our Uber valuation .

This is more complex than what you’d be expected to complete in a time-pressured on-site test, but it is representative of a take-home case study.

Equity Research Recruiting: The Bottom Line

Equity research has seen better days – the 1990s or early 2000s, for example.

That said, the industry won’t “die” overnight because of MiFID II or the rise of passive investing; if buy-side firms are still willing to spend money on research, banks will still offer it.

There will be fewer opportunities in the industry in the future, but it’s still a solid entry point and it still offers a variety of exit opportunities – if you recruit successfully in the first place.

You might be interested in Biotech Equity Research: The Best Escape Plan from Medicine or Academia?

Numi Advisory has provided career coaching, mock interviews, and resume reviews to over 600 clients seeking careers in equity research, private equity, investment management, and hedge funds. With extensive firsthand experience in these fields, Numi offers unparalleled insights on how to ace your interviews and excel on the job.

Numi customizes solutions to each client’s unique background and career aspirations and helps them find the path of least resistance toward securing their dream careers. He has helped place over 150 candidates in leading buy-side and sell-side jobs. For more information on career services and client testimonials, please contact numi.advisory@gmail. com , or visit Numi’s LinkedIn page .

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street . In his spare time, he enjoys lifting weights, running, traveling, obsessively watching TV shows, and defeating Sauron.

Free Exclusive Report: 57-page guide with the action plan you need to break into investment banking - how to tell your story, network, craft a winning resume, and dominate your interviews

Read below or Add a comment

31 thoughts on “ Equity Research Recruiting: The Definitive Guide ”

Should I share my stock pitch if I am contacting someone who covers a completely different sector? Or just send the networking email without my pitch?

I would probably not send a stock pitch upfront unless it’s highly relevant to the person. If they don’t respond, it might be worth including in a follow-up email (as you usually need to follow up a few times to get a response).

To get into equity research if you already graduated from a non target what steps do we have to take? Go get an mba from a m7 and get the cfa 1,2, and 3? Or is there another way that someone that went to a non target can get in

You have already asked some variation of this question multiple times on other articles. The MBA does not help that much with equity research because recruiting is less structured, and the CFA may provide a marginal boost but more so for career changers. Your time is best spent on networking aggressively and coming up with very good stock pitches / sample reports and analyses.

Really great article. I work in the mailroom at one of the largest investment banks. Throughout lockdown i have been doing my own study around finance and what really appeals to me is ER.

I have applied for a few roles internally through the bank including entry level positions however I don’t seem to get passed the vetting process as my experience is Mailroom and not finance related. I have completed many online courses that i pass with flying colours. Do you have any tips for me on how to get pass the vetting process – is the next step doing my CFA Level 1 to show i do have knowledge? (as the online courses im doing are not recognized.

In saying this, I have an interview next week for a Research role within the bank. If you were in my position how do you go about it? Very broad question i know but i just feel as though the interviewers see mailroom on my CV and no 5 year finance or accounting degree and have no time. How can i stand out and show i have a lot of passion for the industry.

Thank you so much for your time, really appreciate it.

Thanks. I think you will have to network with people in ER groups to pass these screens. Otherwise they’re just going to rule you out based on work experience. The CFA will not help because the automated screens are still based on your experience.

Awesome article. Really appreciate your insights! I did not come from a finance degree background (but I am currently studying for CFA level 1 as advised).

I manage a 6-figure long only (equities and ETFs) portfolio on behalf of my close friends and had made recommendations to them before selling/buying.

May I ask how I should include this in my CV for a ER internship application? Should I mention it in detail re: some of the financial modelling I did and the sectors I follow even if it’s not ‘official’? Will I risk sounding pretentious? Like some Garage Band Hedge Fund?

Thanks. Many people don’t take accounts managed for friends/family seriously, so I would not emphasize that too much; maybe just list some of your analysis and recommendations as examples of the work you’ve done but don’t say that you were “managing a portfolio for friends.” Don’t even list the dollar amount. Just act as if they were companies you followed and invested in based on your analysis, and include them to show that you have more of a finance background.

What about internal research and analytics roles at buy side firms, PE, or VC funds? Do they still follow the same interview guidelines and do they offer the same experience/prospects?

Sorry, don’t know enough about them to say. Interviews are probably quite similar, but careers are likely to differ because they’re not affected by factors like MiFID II.

My end goal has been to get into equity research since college, but didn’t end up getting an offer. I did not go to a top business school, but I did graduate magna cun laude (doubled in Economics and Finance). At school participated in the CFA research challenge (placed 3rd), made buy/sell recommendations in a student managed fund managing ~$1.8 million (I was the Energy Sector analyst), and interned at smaller bank in loan origination. Since graduating I took a role in a rotational development program at a top 5 bank. My current rotation is in market risk supporting the securities business. My question is in what areas do you think I should focus on to increase my chances of getting in?

-Thanks! I really enjoy your articles.

I don’t know, I think you have a pretty good background for equity research recruiting, and I’m surprised you didn’t get an offer out of undergrad (was it just your school’s reputation or something else?). You could just stay in your current role, network with research professionals via LinkedIn and email, and send your stock pitches and other work to them. Maybe focus on Energy or financial services so you’re applying to roles that relate to your past experience in some way. I don’t really think it would be worthwhile to get a “steppingstone role” here before ER because you already have club/work experience related to ER.

Hey Brian, thank you for this amazing guide. I would like to have your suggestion: My long-term goal is to become a portfolio manager in either a big IM firm or Hedge Fund. Currently, I’m working toward that goal by going for CFA, investing real money with university’s investing society and gaining all kinds of related experience as much as possible. Recently I just lucky enough to get 2 intern offers: one is an Equity Research intern at a local firm in Taiwan (no one knows this firm outside Taiwan); another is a Product Strategy intern at Invesco. I don’t know which to choose since although ER is apparently what I want to do yet the lack of recognition could be a problem during my future career search (I’m planning to work in HK or even EU, not Taiwan). However, I am also not sure the difficulty to leverage Product Strategy experience into ER after my graduation from MSF.

Really need your suggestion!

I just got one more offer from SC (Retail Banking summer intern). Now I’m more confused. Although retail banking is less related to what I want to do, the brand name of Standard Chartered in Asia is really tempting (I have no such brand name experience so far). What would suggest including this extra information!

If your long-term goal is ER, you should still accept the ER offer, especially if you haven’t had much relevant experience yet.

If you haven’t had previous ER or related finance experience, I would probably pick the ER internship in Taiwan. And then complete an internship at a better-known firm like Invesco later on. You ideally want a mix of 1 very relevant internship and at least 1 internship at a brand-name firm. I think it might be tougher to network and tell your story if you only complete a product strategy internship, even if it’s at Invesco.

Thank you for the prompt reply! I do have other finance intern experience, including one local VC intern during which I researched on market trend and built one IPO valuation model. Would that be relevant enough? If it is a “no”, I will go for the ER offer :)

That is a tough one. I don’t know. Personally, I would still go with the ER offer as long as you have time to get more of a brand-name internship before graduation. If not, then maybe take the Invesco offer.

Got you! Thank you very much for all the suggestions!

Great article, but I have a few questions:

– I have been recruiting for ER for some time now, but have only been setting up informational interviews. Should I reach out to the contacts I have made and send stock pitches with formal questions about job opportunities?

– How do you know which groups are hiring? Where do you get this information?

Thanks in advance.

At some point, you need to ask more directly about job openings, so yes on the first question. You don’t necessarily need to send a stock pitch if you have already spoken with the person, but if you have something reasonably good, it would be a good idea to include.

To find out which groups are hiring, look on job boards and see which banks have posted recent openings in specific locations.

Do you have any tips for somebody hoping to land a full-time role in equity research after spending this summer working in India?

I’m working under a sell-side ER analyst but we cover equities that trade on the BSE/ NSE, not the NYSE/ Nasdaq. I’m confident I can offer a similar skillset, but I have heard of foreign work experience being discounted by employers.

Yes, emerging markets work experience tends to be discounted by employers in major financial centers. Your best bet would be to emphasize that you have experience in both developed and emerging markets (if true) and also point out somewhere on your resume that you’ve also followed or made recommendations for companies in developed markets. Even if it’s something you did as a personal or side project, turn it into work/leadership experience.

Hi Brian–

I may have an opportunity next summer to intern for a research firm that specializes in the healthcare sector. If I’m interested in breaking into IB or trying my luck with HFs out of undergrad, should I avoid this research internship (assuming it’s offered to me)?

I think I would enjoy my summer as a rising third year in New York, but I don’t want to be pegged as the “research guy.” Would this research internship help me transition into a HF role for the subsequent summer?

It depends on what you want to do long term. If your long-term goal is a hedge fund, then a research internship will only help you. If your long-term goal is IB, you pretty much need an IB internship to get in right out of undergrad. A research internship won’t “hurt” you necessarily, but it means you’ll have to lateral or hope you catch a lucky break with accelerated recruiting.

do you have any advice for an incoming ER intern?

Many of the tips here apply: https://mergersandinquisitions.com/investment-banking-internship-preparation/

You don’t need to know as much about deals, but learning Excel, PowerPoint, financial reports for companies in your industry, etc. are all helpful.

Get the job first then ask about the exit options and plus you have to know is another uphill battle to placing and landing an exit.

??? This comment baffles me. You need to think about exit options going into any job, but obviously you don’t ask the interviewer about them or otherwise hint that you want to exit early on. No one wants to end up in a dead-end job that leads nowhere, so exit options are important. We will cover this in Part 2.

Other than IR and buy side, what are the other exit options when you decide to leave equity research? Thanks!

Corporate finance, corporate strategy, and other roles at the bank (investment banking, etc.) are also possible.

Got an Investment Banking Interview?

The BIWS Interview Guide has 578+ pages of technical and fit questions & answers, personal pitch templates, 17 practice case studies, and more.

15 Equity Research Analyst Interview Questions (With Example Answers)

It's important to prepare for an interview in order to improve your chances of getting the job. Researching questions beforehand can help you give better answers during the interview. Most interviews will include questions about your personality, qualifications, experience and how well you would fit the job. In this article, we review examples of various equity research analyst interview questions and sample answers to some of the most common questions.

or download as PDF

Common Equity Research Analyst Interview Questions

How do you think about and analyze equity investments, what is your experience with conducting research on companies and industries, how do you go about constructing a financial model for a company, what are your thoughts on valuation methods, how do you think about risk when making investment decisions, what have been some of your most successful investments, what have been some of your biggest losses, what do you think is the most important thing to know in order to be successful in equity research, how do you stay up-to-date on developments in your field, who are some of the most respected analysts in your field, what do you think sets your research apart from that of other analysts, what do you think is the most important factor to consider when making investment decisions, what are your thoughts on market timing, what are your thoughts on active vs. passive investing, what do you think is the most important thing for investors to remember when making investment decisions.

An interviewer would ask "How do you think about and analyze equity investments?" to a/an Equity Research Analyst in order to gauge the analyst's investment philosophy and process. It is important to know an analyst's investment philosophy and process because it will give you insight into how the analyst makes investment decisions, what type of investments the analyst is likely to recommend, and how the analyst's recommendations might perform over time.

Example: “ I think about and analyze equity investments by looking at a company's financial statements, its competitive landscape, and its overall business strategy. I also look at analyst reports and other research to get a sense of where a company is headed. ”

The interviewer is asking this question to gauge the analyst's ability to conduct research on companies and industries. This is important because equity research analysts need to be able to understand a company's financials, its competitive landscape, and the trends affecting its industry in order to make recommendations to their clients.

An analyst who is not able to conduct thorough research on companies and industries will not be able to provide accurate and actionable recommendations. This could lead to losses for the analyst's clients and damage the analyst's reputation.

Example: “ I have experience conducting research on companies and industries. I have worked as an equity research analyst for a few years and have gained a lot of knowledge about the process. I know how to use different sources of information to gather data and then analyze it to form conclusions. I am also familiar with financial modeling and valuation techniques. ”

An interviewer would ask "How do you go about constructing a financial model for a company?" to an equity research analyst to understand how the analyst creates a model to value a company. It is important for the interviewer to understand the analyst's process because the model is only as good as the inputs and assumptions used. If the analyst has a sound process, it is more likely that the model will be accurate.

Example: “ There are a few steps that go into constructing a financial model for a company. The first step is to gather data on the company, including historical financial data, if available. This data can be gathered from the company's financial statements, SEC filings, and other public sources. Next, you will need to create assumptions about the future of the company. This includes estimating things like revenue growth, expense growth, and capital expenditure requirements. Once you have your assumptions in place, you can begin building out the model. This typically involves creating a pro forma income statement, balance sheet, and cash flow statement. These statements can then be used to generate key metrics and ratios that can be analyzed to assess the financial health of the company. ”

Valuation methods are important to equity research analysts because they provide a framework for estimating the intrinsic value of a security. This is important because it allows analysts to make recommendations to buy or sell securities based on whether they are trading at a discount or premium to their intrinsic value. There are many different valuation methods, and each has its own strengths and weaknesses. As such, it is important for analysts to be familiar with a variety of methods in order to make the most informed recommendations possible.

Example: “ There are a number of different valuation methods that equity research analysts use to estimate the value of a company or security. Some common methods include discounted cash flow analysis, relative valuation, and intrinsic value estimation. Discounted cash flow analysis (DCF) is a method of valuing a company or security based on its future cash flows. The idea behind DCF is that the value of an asset is the present value of all its future cash flows. In order to estimate the present value of future cash flows, DCF uses a discount rate. This discount rate represents the opportunity cost of investing in the company or security, and is typically based on the risk-free rate plus a risk premium. Relative valuation is a method of valuing a company or security by comparing it to similar companies or securities. Relative valuation methods include price-to-earnings (P/E) ratios, price-to-book (P/B) ratios, and enterprise value-to-EBITDA (EV/EBITDA) ratios. These ratios compare the company or security being valued to other companies or securities in the same industry, with the idea being that similar companies or securities should have similar values. Intrinsic value estimation is ”

There are a few reasons why an interviewer might ask this question to an equity research analyst. Firstly, it is important to understand how an analyst thinks about risk when making investment decisions because it can impact the type of recommendations they make to clients. Secondly, it can also impact the performance of a portfolio if an analyst is not appropriately managing risk. Finally, this question allows the interviewer to gauge an analyst's level of risk tolerance and understanding of risk management techniques.

Example: “ There are a number of different ways to think about risk when making investment decisions. One way is to consider the potential downside of an investment, and compare that to the potential upside. Another way is to think about the probability of different outcomes occurring, and how much each outcome would impact your portfolio. When it comes to downside risk, one important thing to consider is the worst-case scenario for an investment. What could happen that would cause the investment to lose value? How likely is it that this scenario will occur? And how much money would you stand to lose if it did occur? It's also important to think about the probability of different outcomes occurring. For example, what is the chance that an investment will go up in value? What is the chance that it will go down in value? And what is the chance that it will stay flat? Different investors have different tolerance levels for risk. Some investors are willing to take on more risk in exchange for the potential of higher returns, while others prefer to play it safe and focus on preserving their capital. Ultimately, it's up to each individual investor to decide how much risk they're comfortable taking on. ”

An interviewer might ask an equity research analyst about their most successful investments in order to get a sense of their investment strategy and how they generate returns. This question can also be used to gauge an analyst's level of experience and their ability to generate alpha (excess return) in their investments.

Example: “ Some of my most successful investments have been in technology companies, particularly those that are leaders in their respective fields. I have also had success with investments in healthcare and biotechnology companies. In general, I have found that companies with strong fundamentals and a solid track record of growth tend to be the most successful investments. ”

This question is designed to test an analyst's ability to handle setbacks and to learn from their losses. It is important for an equity research analyst to be able to identify their own mistakes and to learn from them in order to avoid repeating them in the future.

Example: “ Some of my biggest losses have been in the stock market. I have also lost money in investments in real estate and other businesses. However, I have learned from my mistakes and I am now more careful with my money. ”

There are a few key things that equity research analysts need to know in order to be successful. First, they need to have a strong understanding of the financial markets and how they work. They also need to be able to analyze companies' financial statements and identify trends. Additionally, equity research analysts need to be able to effectively communicate their findings to clients and potential investors.

The most important thing for an equity research analyst to know is how to effectively communicate their findings to clients and potential investors. This is important because equity research is all about providing analysis and recommendations to investors in order to help them make informed decisions. If an analyst cannot communicate their findings clearly, investors will not be able to understand and use the information properly.

Another important thing for an equity research analyst to know is how to effectively use financial analysis tools. This is important because analysts need to be able to identify trends and make recommendations based on their findings. If an analyst does not have strong financial analysis skills, they will not be able to provide accurate and useful information to investors.

Lastly, it is important for an equity research analyst to have a strong understanding of the markets. This is important because analysts need to be able to identify opportunities and make recommendations based on their findings. If an analyst does not have a strong understanding of the markets, they will not be able to provide accurate and useful information to investors.

Example: “ There are a few key things that are important to know in order to be successful in equity research. First, it is important to have a strong understanding of financial accounting and financial statements. This will allow you to understand a company's financial position and performance, and identify any red flags that may be present. Second, it is important to have a strong understanding of valuation methods and be able to value a company using various techniques. This will allow you to determine whether a stock is undervalued or overvalued, and make investment recommendations accordingly. Finally, it is important to be able to effectively communicate your research findings and recommendations to clients or investors. This includes being able to clearly articulate your investment thesis and explain your rationale behind it. ”

The interviewer is trying to gauge the analyst's commitment to keeping up with changes in their field. This is important because the equity research analyst needs to have a good understanding of the current landscape in order to make accurate predictions about the future performance of a company's stock.

Example: “ There are a few different ways that I stay up-to-date on developments in my field. I read industry-specific news sources and publications, attend relevant conferences and seminars, and network with other professionals in my field. Additionally, I make it a point to keep up with the latest research in my field by reading academic journals and papers. By staying informed of new developments, I am able to provide my clients with the most accurate and up-to-date information possible. ”

The interviewer is asking this question to gain insight into the equity research analyst's network and the sources that he or she uses to generate investment ideas. It is important for the interviewer to understand the equity research analyst's process for generating investment ideas, and this question helps to shed light on that process. Additionally, this question allows the interviewer to gauge the equity research analyst's level of expertise in the field.

Example: “ There are many respected analysts in the field of equity research, but some of the most highly respected ones include: 1. Jim Cramer - He is a former hedge fund manager and now hosts the popular financial news show "Mad Money" on CNBC. He is known for his in-depth analysis and stock picking skills. 2. Peter Schiff - He is the CEO and Chief Economist of Euro Pacific Capital, Inc. He is a well-known financial commentator and has accurately predicted many major economic events, such as the housing market crash in 2008. 3. Jeremy Siegel - He is a professor at the University of Pennsylvania's Wharton School of Business. He is one of the leading experts on stock market history and has written several books on the subject, including "Stocks for the Long Run." 4. Andrew Smithers - He is the founder of Smithers & Co., an economic research firm. He is a renowned expert on valuation and has written extensively on the topic, including his book "Valuing Wall Street: Protecting Wealth in Turbulent Markets." ”

There are a few reasons why an interviewer might ask this question:

1. To gauge the analyst's confidence in their research. If the analyst is unable to articulate what sets their research apart, it may be an indication that they are not as confident in their abilities as the interviewer would like.

2. To see if the analyst is familiar with the competition. It is important for an equity research analyst to be aware of what other analysts are doing in order to make sure that their research is truly unique.

3. To get a sense of the analyst's analytical skills. In order to answer this question well, the analyst must be able to critically evaluate their own work and compare it to that of others. This ability to compare and contrast is an important skill for an analyst to have.

Example: “ There are a number of things that can set my research apart from that of other analysts. First, I have a strong understanding of the companies and industries that I cover. I'm always up-to-date on the latest news and developments affecting these companies and industries, and I have a deep understanding of the underlying trends driving them. This allows me to provide insights and perspectives that other analysts may not be able to provide. Second, I'm very disciplined in the way that I approach my research. I have a rigorous process that I follow in order to ensure that my analysis is as accurate and objective as possible. This process includes conducting extensive primary and secondary research, analyzing data from multiple sources, and speaking with industry experts. Third, I have a proven track record of being able to identify companies that are poised for success. Over the years, I've developed a keen eye for spotting companies with strong fundamentals and attractive growth prospects. As a result, my recommendations have outperformed the market by a wide margin. In sum, these are just a few of the things that sets my research apart from that of other analysts. ”

The most important factor to consider when making investment decisions is the risk-return tradeoff. This is the balancing of the potential return of an investment against the risks involved. Higher potential returns are usually associated with higher risks. It is important to consider this tradeoff when making investment decisions because it can help you choose investments that are right for your goals and risk tolerance.

Example: “ There are many factors to consider when making investment decisions, but the most important factor is likely to be the expected return on investment. Other important factors could include the level of risk involved, the liquidity of the investment, and the time horizon over which the investment is expected to generate returns. ”

There are a few reasons an interviewer might ask an equity research analyst about their thoughts on market timing. Firstly, it is important to know how an analyst views the market in order to gauge their investment recommendations. Secondly, market timing is a difficult skill to master, and if an analyst is able to do it successfully, it can add a lot of value to their research. Finally, market timing is a controversial topic, and an analyst's views on it can reveal a lot about their investment philosophy.

Example: “ There is no perfect answer to market timing, as there are a number of factors to consider and no one can predict the future with 100% accuracy. However, there are a few general principles that can be followed in order to improve your chances of success. 1. Have a long-term perspective: One of the biggest mistakes investors make is trying to time the market short-term. This is often driven by fear or greed, which are two emotions that should be avoided when making investment decisions. Instead, focus on your long-term goals and objectives, and don’t let short-term fluctuations in the market derail your plans. 2. Consider your risk tolerance: Another important factor to consider is your risk tolerance. If you are investing for retirement, for example, you may have a longer time horizon and be able to tolerate more volatility in the markets. On the other hand, if you are investing for a shorter-term goal, such as a child’s education, you may need to be more conservative in your approach. 3. Have a diversified portfolio: Diversification is key to any investment strategy, and this is especially true when it comes to market timing. By spreading your investments across different asset classes, ”

There are a few reasons why an interviewer might ask this question to an equity research analyst. First, it is a way to gauge the analyst's investment philosophy and approach. Second, it is a way to see if the analyst is familiar with the different types of investment strategies. Finally, it is a way to get the analyst's thoughts on which type of strategy is more effective.

Active investing is a strategy where the investor takes a more hands-on approach, trying to beat the market by picking individual stocks. Passive investing is a strategy where the investor tries to match the market, typically by investing in index funds.

There are pros and cons to both approaches. Active investing can provide higher returns if the investor is successful in picking stocks, but it also carries more risk. Passive investing is more predictable but typically provides lower returns.

The answer to this question will depend on the analyst's personal opinion. Some analysts may believe that active investing is more effective, while others may believe that passive investing is a better strategy. There is no right or wrong answer, but it is important for the analyst to be able to explain their reasoning.

Example: “ There are pros and cons to both active and passive investing. Active investing involves trying to beat the market by picking stocks that will outperform the overall market. Passive investing involves investing in a basket of stocks that track a market index, such as the S&P 500. Active investors argue that they can add value by carefully picking stocks that are undervalued by the market and selling those that are overvalued. Passive investors counter that it is very difficult to consistently pick stocks that will outperform the market, and that the fees charged by active managers eat into any potential gains. Both approaches have merits and it really depends on the investor’s goals and preferences as to which approach makes more sense. ”

There are a few reasons why an interviewer might ask this question to an equity research analyst. First, it allows the interviewer to gauge the analyst's understanding of the investment process and what factors should be considered when making investment decisions. Second, it gives the interviewer insight into the analyst's thought process and how they approach investment analysis. Finally, it allows the interviewer to see if the analyst is able to articulate their thoughts clearly and concisely.

The most important thing for investors to remember when making investment decisions is to think long-term. Too often, investors get caught up in the short-term fluctuations of the stock market and make decisions based on emotion rather than logic. This can lead to poor investment decisions that can cost them a lot of money in the long run. By thinking long-term, investors can avoid these mistakes and give themselves a better chance at earning a profit on their investments.

Example: “ There are a few things that investors should remember when making investment decisions: 1. Diversification is key - don't put all your eggs in one basket. 2. Consider your risk tolerance - how much risk are you willing to take on? 3. Do your homework - research the investments you're considering thoroughly. 4. Have a plan - know what your goals are and stick to your plan. 5. Be patient - don't try to time the market, but rather invest for the long term. ”

By Industry

Investment Banking
Private Equity
Hedge Funds
Real Estate
Venture Capital
Asset Management
Equity Research
Investing, Markets Forum
Business School
Fashion Advice
Interview Questions

Why Equity Research

How to answer the question "Why Equity Research"

Mr. Arora is an experienced private equity investment professional, with experience working across multiple markets. Rohan has a focus in particular on consumer and business services transactions and operational growth. Rohan has also worked at Evercore, where he also spent time in private equity advisory.

Rohan holds a BA (Hons., Scholar) in Economics and Management from Oxford University.

Prior to becoming a Founder for Curiocity, Hassan worked for Houlihan Lokey as an Investment Banking Analyst focusing on sellside and buyside M&A , restructurings, financings and strategic advisory engagements across industry groups.

Hassan holds a BS from the University of Pennsylvania in Economics.

What Do Equity Research Professionals Do?

Why equity research interview question, other equity research interview questions, why equity research interview questions - final tips.

Equity research (ER) is a position for analysts to evaluate a company’s financial information and perform ratio analysis while forecasting future values by using applications like Excel to perform financial modeling .

More specifically, this role intends to find optimized scenarios to either buy or sell stocks and form investment strategies that would minimize risk while maximizing profit and return.

Upon compiling all the quantitative analysis and calculations , equity research analysts put their findings in an equity research report.

Some clients wanting to hire equity researchers include investment banks for the sell side , institutions for the buy side , or independent organizations.

Notably, equity research does not have a hierarchy or seniority like in investment banking. However, there are two main positions, which are associates and analysts. Unlike other fields of finance, an associate equity research professional is more junior than their counterpart.

Some of the most reputable companies that perform equity research include:

JP Morgan Chase and Co
Bank of America Merrill Lynch
Credit Suisse
Barclays Capital
Goldman Sachs
Morgan Stanley

Equity research is a rather technical position to have, meaning that interview questions would entail a decent amount of conceptual questions.

This is because interviewers need to gauge how competent the candidate is in making approximations and investment decisions and understanding how different financial values indicate a company’s performance.

To understand what types of technical questions sales and trading candidates may encounter, we must also understand what people do in this department.

From an overview standpoint, here is a list of things these analysts do before submitting their reports.

1. Perform valuations of listed companies

By using stock exchanges like NYSE, Nasdaq , or Russell 3000, a researcher can find a general surface-level valuation of a company’s performance through metrics like stock price, trade volume, market cap , and P/E ratio, among others.

From an interview standpoint, you would need to have a very profound understanding of market trends and other concepts to determine the value of a company based on stock charts. Some questions may ask you to determine if a company is under or overvalued based on a ratio.

2. Research the industry and other economic parameters

Suppose the company has a positive outlook regarding its business performance. In that case, the researcher will then analyze factors like GDP , growth rates, market size, competitive landscape and fragmentation, and EBITDA margins to grasp a more market-specific understanding of the business’s prospects.

In potential case studies through an interview setting, interviewers may ask you to perform market research and comparative analysis to understand how a company is doing. This will also factor into making decisions in sales and trading.

3. Analyze fundamental financials

Upon learning about the industry’s landscape in more detail, the researchers can find the company's financial statements , including the balance sheet , cash flows, and income statement , and determine how well the company has been operating through trends.

Therefore, having great analytical skills and deconstructing financial statements are crucial when going into an interview. Some questions may entail coming up with an investment proposal after seeing a company’s financial information.

4. Project growth, revenue, and profits

Using the data from the financial information, researchers will then create projections from a managerial perspective on a company’s potential for expansion and increase in revenue or profits. Factors like customer retention and industry trends will also factor into this evaluation.

5. Use financial evaluation models

Some of the company equity valuation models include discounted cash flow ( DCF ), initial public offering ( IPO ), leveraged buyout ( LBO ), relative valuations, or sum of the parts valuation. Researchers will undergo these calculations to assess a company's potential more holistically.

This also means some interview questions may require you to walk through a financial modeling process. Make sure to be concise and straightforward when answering questions like this.

6. Compare findings to the stock exchange

The researchers will find a fair price for the company after going through the evaluation procedure above. Their goal is to compare this finding to the current market price displayed on the stock exchange.

7. Conclude if the stocks are overvalued or undervalued

Here is how an equity researcher determines if a stock is overvalued or undervalued.

Fair price < Current market price

Then the stocks are overvalued, meaning that it is recommended for investors to sell their holdings.

Fair price > Current market price

Then the stocks are undervalued, meaning that it is recommended for investors to buy stocks from the company.

Of course, if the fair price equals the current market price, the stock is neither overvalued nor undervalued, meaning it is fairly priced and that investors should hold. This also means minimal incentives exist to buy or sell the stock, depending on the investor’s personal projections and risk preferences.

8. Recommend investment strategies and work with clients

With the report in hand and a conclusive suggestion established through financial modeling calculations, equity researchers will talk to their clients about the results.

This means that being in sales and trading requires great communication skills. Some of the behavioral questions will assess this.

This question is an opportunity for you to demonstrate your interest, passion, and commitment to the role.

As one of the most common questions when undergoing any interviews in the finance industry, you should always come prepared with an answer as you should expect this to come up.

This question could be asked in various ways, so let us cover some of the sample questions and answers.

Please note that the example answers we provided are merely for consideration. The intention is to give you a general idea and framework for how you should prepare for and answer these questions.

Why do you like ER?

This question assesses the candidate’s passion for the field. When responding, make sure to be genuine and authentic. Avoid mentioning money, exit opportunities, or irrelevant information that will harm your chances of being selected.

This is because companies want salespeople and traders to be committed to their company and stay long. Having monetary or other non-sales and trading ambitions shows that you do not have a genuine interest in the role and do not have a passion or the motivation to excel in the position.

Therefore, you should be more personable and creative in how you structure your reasons. A way you can approach answering this question is by stating how your previous work experiences made you gravitate towards analyzing numbers and dive into quantitative reasoning.

Another way is to show how a club activity or research paper you have done made you wonder more about market trends and stock performance.

Sample answer:

“As someone who likes to immerse myself in determining the movement of stocks and the future prospects of a company, I am fascinated by deconstructing financial information to find the value of a business. To me, finding the answer to whether the company is overpriced, undervalued, or fairly priced is like solving a math problem. I love to know the reasons behind a company’s performance and how an industry follows trends while undergoing this process.”

Here is another example of a similar question the interviewer might ask you:

What about equity research appealed to you?

“From a young age, I have been fascinated with drawing conclusions from numbers and data. In high school, I began investigating financial models and using Excel sheets to craft surface-level analyses of stocks. Through my quantitative strengths, I eventually began using my models to drive investment decisions after acquiring a Robinhood account. Eventually, I participated in many clubs during college where I could craft in-depth analytical reports on stock performances and compare them. Thus, I became drawn to equity research, and I view it as a mathematical game that requires a comprehensive understanding of the market.”

Why do you want to become an equity analyst?

“One of my hobbies is data storytelling. I like how numbers on a spreadsheet could draw a conclusion about a company or industry's financial and economic performance. It becomes more fascinating when these conclusions lead to investment strategies. Having prior trading experience, I now incorporate my strengths into my research to find undervalued stocks. The process of finding financial information, using financial modeling, and writing analytical reports to me is like building a puzzle.”

Here are some common ER questions with some sample responses to provide a basic framework as to how you should approach answering them.

Please acknowledge that the sample answers in this article are surface-level and general. In your interview, make sure to dive deeper when possible and make the answers personal and specific.

Everything You Need To Break into Investment Banking

Researched and authored by Max Guan | LinkedIn

Reviewed and Edited by Wissam El Maouch | LinkedIn

Free Resources

To continue learning and advancing your career, check out these additional helpful WSO resources:

Asset Management Interview Questions
Financial Modeling Interview Questions
Investment Banking Interview Questions
Venture Capital VC Interview Questions
Why Private Equity?

Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.

or Want to Sign up with your social account?

Domain 1 – Understanding DCF

Question 1: What is the primary goal of a Discounted Cash Flow (DCF) analysis? A) Calculate historical financial metrics. B) Compare company performance with competitors. C) Estimate present value of future cash flows. D) Determine short-term stock price movements. Answer: C) Estimate present value of future cash flows. Explanation: DCF analysis evaluates future cash flow values.

Question 2: Which discount rate accounts for time value of money in DCF? A) Historical cost of capital. B) Industry average cost of equity. C) Fixed government interest rate. D) Weighted Average Cost of Capital (WACC). Answer: D) Weighted Average Cost of Capital (WACC). Explanation: WACC includes equity and debt costs.

Question 3: How does terminal value contribute to DCF analysis? A) Calculates historical earnings. B) Provides company’s current stock price. C) Estimates value of future cash flows beyond forecast period. D) Focuses on short-term profitability. Answer: C) Estimates value of future cash flows beyond the forecast period. Explanation: Terminal value captures long-term value.

Question 4: What is the purpose of sensitivity analysis in DCF modelling? A) Predict short-term stock price movements. B) Assess historical financial metrics. C) Evaluate the impact of changing assumptions on valuation. D) Focus on government regulations. Answer: C) Evaluate the impact of changing assumptions on valuation. Explanation: Sensitivity analysis tests assumptions’ effects.

Domain 2 – Comparable Company Analysis

Question 1: What is the main objective of Comparable Company Analysis (CCA)? A) Calculate the company’s terminal value. B) Estimate the present value of future cash flows. C) Compare the company’s metrics with similar firms. D) Assess the company’s historical performance. Answer: C) Compare the company’s metrics with similar firms. Explanation: CCA evaluates relative performance.

Question 2: How are comparable companies selected for analysis? A) Pick companies from the same industry regardless of size. B) Include companies from unrelated industries. C) Consider companies with similar size, industry, and operations. D) Focus on government regulations. Answer: C) Consider companies with similar size, industry, and operations. Explanation: Comparability ensures meaningful analysis.

Question 3: What is the significance of valuation multiples in Comparable Company Analysis? A) Determine the company’s current stock price. B) Assess historical financial metrics. C) Provide a range of valuations for the target company. D) Predict short-term cash flows. Answer: C) Provide a range of valuations for the target company. Explanation: Valuation multiples offer benchmarking.

Question 4: How can EBITDA multiple be used in Comparable Company Analysis? A) Calculate historical earnings. B) Estimate the company’s WACC. C) Assess industry growth rates. D) Value the company based on its earnings. Answer: D) Value the company based on its earnings. Explanation: EBITDA multiple relates to earnings.

Domain 3 – Sensitivity Analysis

Question 1: What is the purpose of sensitivity analysis in financial modelling? A) Predict short-term stock price movements. B) Assess historical financial metrics. C) Evaluate the impact of changing assumptions on model outcomes. D) Focus on government regulations. Answer: C) Evaluate the impact of changing assumptions on model outcomes. Explanation: Sensitivity analysis tests assumptions’ influence.

Question 2: How are sensitivity analysis results typically presented? A) Historical earnings trends. B) Pie chart format. C) Range of outcomes based on varying assumptions. D) Comparison of industry growth rates. Answer: C) Range of outcomes based on varying assumptions. Explanation: Range shows outcome variability.

Question 3: What is the benefit of using tornado diagrams in sensitivity analysis? A) Predict short-term cash flows. B) Assess historical financial metrics. C) Provide visuals of variable impacts on the model. D) Determine the company’s current stock price. Answer: C) Provide a visual of variable impacts on the model. Explanation: Tornado diagrams illustrate sensitivity.

Question 4: How does sensitivity analysis aid in risk assessment? A) Assess industry growth rates. B) Predict short-term stock price movements. C) Evaluate the effect of uncertain variables on outcomes. D) Focus on government regulations. Answer: C) Evaluate the effect of uncertain variables on outcomes. Explanation: Sensitivity analysis assesses variable risk.

Domain 4 – Complex Modelling Scenarios

Question 1: In DCF analysis, how can you account for changing growth rates? A) Use one growth rate for all future periods. B) Assume constant growth rates for each period. C) Utilize variable growth rates for different forecast periods. D) Focus solely on terminal value. Answer: C) Utilize variable growth rates for different forecast periods. Explanation: Variable growth rates capture trends.

Question 2: How does the choice of discount rate impact DCF valuation? A) No impact on valuation. B) Higher rate increases valuation. C) Lower rate increases valuation. D) Discount rate focuses on terminal value. Answer: B) Higher rate increases valuation. Explanation: Higher rate lowers present value.

Question 3: What factors impact comparability in Comparable Company Analysis? A) Historical earnings trends. B) Unrelated industry and operations. C) Similar size and industry. D) Government regulations only. Answer: B) Unrelated industry and operations. Explanation: Comparability requires relevance.

Question 4: How can you analyse extreme scenarios in sensitivity analysis? A) Ignore uncertain variables. B) Focus solely on historical data. C) Test model’s response to extreme assumptions. D) Predict short-term stock price movements. Answer: C) Test model’s response to extreme assumptions. Explanation: Extreme scenarios test model resilience.

Domain 5 – Scenario Integration and Interpretation

Question 1: How can you incorporate DCF and CCA in a comprehensive valuation scenario? A) Keep DCF and CCA separate. B) Use DCF for large companies, and CCA for small ones. C) Integrate DCF and CCA for holistic valuation. D) Focus on historical financial data. Answer: C) Integrate DCF and CCA for holistic valuation. Explanation: Integration enhances valuation accuracy.

Question 2: What role does sensitivity analysis play in scenario interpretation? A) Predict short-term stock price movements. B) Assess historical financial metrics. C) Highlight potential outcomes based on assumptions. D) Focus on government regulations. Answer: C) Highlight potential outcomes based on assumptions. Explanation: Sensitivity analysis explores assumptions’ impact.

Question 3: How can you convey complex scenarios to non-finance stakeholders? A) Use industry jargon extensively. B) Simplify data and focus solely on numerical results. C) Explain assumptions, outcomes, and implications clearly. D) Only share historical earnings data. Answer: C) Explain assumptions, outcomes, and implications clearly. Explanation: Clear communication enhances understanding.

Question 4: What is the ultimate goal of scenario interpretation in equity research? A) Predict short-term stock price movements. B) Assess historical financial metrics. C) Translate data into actionable insights for decision-making. D) Focus on government regulations. Answer: C) Translate data into actionable insights for decision-making. Explanation: Scenario interpretation guides decisions.

Domain 6 – Financial Modelling Accuracy

Question 1: How can you ensure accuracy in financial

models? A) Rely solely on historical earnings data. B) Omit sensitivity analysis. C) Validate data sources, formulas, and calculations. D) Focus on predicting short-term cash flows. Answer: C) Validate data sources, formulas, and calculations. Explanation: Validation enhances model reliability.

Question 2: What is the impact of incorrect data inputs on financial models? A) No impact on model outcomes. B) Decrease model reliability. C) Increase model accuracy. D) Predict short-term stock price movements. Answer: B) Decrease model reliability. Explanation: Incorrect data affects model validity.

Question 3: How can you address potential errors in financial modelling? A) Ignore errors and proceed with analysis. B) Revert to historical earnings data. C) Review inputs, formulas, and calculations rigorously. D) Focus solely on government regulations. Answer: C) Review inputs, formulas, and calculations rigorously. Explanation: A rigorous review minimizes errors.

Question 4: What measures can enhance transparency in financial models? A) Omitting assumptions. B) Avoiding explanations of variables. C) Providing clear assumptions, methodology, and sources. D) Predicting short-term cash flows. Answer: C) Providing clear assumptions, methodology, and sources. Explanation: Transparency builds model credibility.

Domain 7 – Industry and Sector Analysis

Question 1: Why is industry analysis crucial in equity research modelling? A) Predict short-term stock price movements. B) Assess historical financial metrics. C) Understand industry trends, dynamics, and risks. D) Focus on government regulations. Answer: C) Understand industry trends, dynamics, and risks. Explanation: Industry analysis informs valuation.

Question 2: How can industry factors impact company valuation? A) They have no influence on valuation. B) They solely affect government regulations. C) Industry trends can affect growth rates, risk, and profitability. D) Focus on predicting short-term cash flows. Answer: C) Industry trends can affect growth rates, risk, and profitability. Explanation: Industry factors shape company prospects.

Question 3: What role does competitive landscape play in equity research? A) Predict short-term stock price movements. B) Assess historical financial metrics. C) Understand market share, rivalry, and positioning. D) Focus on government regulations. Answer: C) Understand market share, rivalry, and positioning. Explanation: Competitive landscape informs strategy.

Question 4: How can you integrate industry analysis into financial modelling? A) Rely solely on historical earnings data. B) Ignore industry trends and forecasts. C) Factor industry-specific variables into assumptions and growth rates. D) Focus on predicting short-term cash flows. Answer: C) Factor industry-specific variables into assumptions and growth rates. Explanation: Industry integration enhances accuracy.

Equity Research Modelling: Domain 8 – Valuation Methods Comparison

Question 1: How does DCF differ from Comparable Company Analysis (CCA)? A) DCF considers industry trends, CCA does not. B) DCF relies on historical data, and CCA uses future projections. C) DCF focuses on relative valuation, and CCA on intrinsic valuation. D) DCF is suitable for small companies, CCA for large ones. Answer: C) DCF focuses on relative valuation, and CCA on intrinsic valuation. Explanation: DCF values are based on future cash flows, and CCA compares metrics.

Question 2: What advantage does CCA have over DCF in terms of data availability? A) CCA relies solely on historical data. B) CCA uses forecasts, DCF does not. C) CCA requires less industry knowledge. D) CCA relies on fewer assumptions. Answer: A) CCA relies solely on historical data. Explanation: CCA uses readily available data for comparisons.

Question 3: When might Sensitivity Analysis be more crucial in DCF versus CCA? A) DCF with high growth forecasts. B) CCA in a rapidly changing industry. C) DCF with stable cash flows. D) CCA when historical data is scarce. Answer: A) DCF with high growth forecasts. Explanation: Sensitivity analysis explores DCF’s assumptions.

Question 4: What type of scenarios does Scenario Integration address? A) Historical earnings analysis. B) Company-specific assumptions. C) Industry-wide trends. D) Comparing companies of different sizes. Answer: B) Company-specific assumptions. Explanation: Scenario integration combines multiple variables.

Domain 9 – Real-world Data Challenges

Question 1: How can inconsistent data impact financial modelling? A) It has no effect on model outcomes. B) It increases model reliability. C) It decreases model accuracy. D) It predicts short-term stock price movements. Answer: C) It decreases model accuracy. Explanation: Inconsistent data leads to inaccurate results.

Question 2: What steps can you take to mitigate data challenges? A) Ignore inconsistencies. B) Document data sources and assumptions. C) Rely solely on historical data. D) Focus on predicting short-term cash flows. Answer: B) Document data sources and assumptions. Explanation: Documentation helps address data issues.

Question 3: Why is sensitivity analysis crucial when dealing with uncertain data? A) Predict short-term stock price movements. B) Assess historical financial metrics. C) Evaluate potential impacts of data inaccuracies. D) Focus on government regulations. Answer: C) Evaluate potential impacts of data inaccuracies. Explanation: Sensitivity analysis tests data sensitivity.

Question 4: How does industry analysis help verify data accuracy? A) Predict short-term stock price movements. B) Assess historical financial metrics. C) Cross-referencing with industry benchmarks. D) Focus on government regulations. Answer: C) Cross-referencing with industry benchmarks. Explanation: Industry benchmarks validate data credibility.

Domain 10 – Articulating Insights

Question 1: Why is clear communication essential in equity research? A) Predict short-term stock price movements. B) Present data in a complex manner. C) Explain assumptions, findings, and implications clearly. D) Focus solely on government regulations. Answer: C) Explain assumptions, findings, and implications clearly. Explanation: Clear communication aids understanding.

Question 2: How can you present complex financial models to non-finance stakeholders? A) Focus solely on numerical results. B) Simplify data without context. C) Highlight assumptions, outcomes, and implications. D) Predict short-term cash flows. Answer: C) Highlight assumptions, outcomes, and implications. Explanation: Context enhances stakeholders’ comprehension.

Question 3: Why is it important to link insights to actionable recommendations? A) Predict short-term stock price movements. B) Focus on historical financial metrics. C) Ensure comprehensive data coverage. D) Translate analysis into decision-making guidance. Answer: D) Translate analysis into decision-making guidance. Explanation: Recommendations make insights actionable.

Question 4: How do equity research analysts contribute to investment decisions? A) Predict short-term stock price movements. B) Assess historical financial metrics. C) Provide actionable insights for investment choices. D) Focus solely on government regulations. Answer: C) Provide actionable insights for investment choices. Explanation: Analysts inform investment decisions.

Equity Research Modelling Scenarios encompass a diverse range of domains that test candidates’ analytical, modelling, and communication skills. By mastering these scenarios, candidates can enhance their abilities to evaluate companies, industries, and market trends while articulating their findings to diverse audiences. Proficiency in these domains not only prepares candidates for interviews but also equips them to excel in real-world finance roles, contributing meaningfully to investment decision-making and strategic planning.

Top 50 Equity Research Modelling Interview Questions and Answers

Share this post

Get Govt. Certified Secure Assured Job Interview

Government certificate

Lifetime Valid

Job Support

Industry Recognized

Upgrade Your Job Skills Now!

Get industry recognized certification – contact us.

IMAGES

Equity Research Interview Questions and Answers (40 Samples)
Equity Research Interview Questions and Answers (40 Samples)
Equity Research: Meaning, Career, Roles, How it Works (2023)
Equity Research Interview Questions and Answers (40 Samples)
Equity Research Interview Questions and Answers
Equity Research Interview Questions and Answers (40 Samples)

VIDEO

Learn Equity Research for Free
How to do Equity Research? here's the start!
What is equity in Research?
Detailed Equity Research Checklist and Interview Questions ✅😊 #nismexam #researchanalyst #financejob
Carlsquare Equity Research interview with Nosa Plugs
Basics of Equity Research

COMMENTS

Equity Research Interview Questions and Answers (40 Samples)
Equity Research Interview Questions and Answers (40 Samples) Equity Research ... The following free WSO ER interview guide is a comprehensive tool designed to cover every single aspect of the ER interview process, walking you through step by step from the beginning to the end of the interview. This interview guide will drastically improve your ...
Equity Research Interview Questions
These are all variants on one of the most common equity research interview questions - pitch me a stock. Be prepared to pitch three or four stocks - for example, a large cap stock, a small cap stock, and a stock that you would short. For any company you are going to pitch, make sure that you have read a few analyst reports and know key ...
Equity Research Interview Questions (with Answers)
Valuation Interview Questions. Private Equity Interview. Corporate Finance Interview Questions (with Answers) Prepare well and give your best shot. All the best for your Equity Research interview! Here we take up the top 20 Equity Research interview questions which are often asked in interviews. Use this Q&A guide to prepare for upcoming interview.
30 Equity Research Analyst Interview Questions and Answers
6. Explain how you would analyze a company's balance sheet, income statement, and cash flow statement. Delving into a company's financial statements is a critical aspect of an equity research analyst's role, as it helps to determine the overall financial health and value of the organization.
How to Ace Your Equity Research Interview: Answers to the 30 Most
Suggested Answer: The 10-year T-Note rate is currently 3.482%, with an open yield of 3.398%, a day high of 3.501%, a day low of 3.389%, and a previous close of 3.399%. The current price of the 10-year T-Note is 105.2969, with a price change of -0.7188 and a price change percentage of -0.6797%.
Equity Research Interview Questions (Top 50 With Answers)
Report Writing Skills. Accounting Skills. Excel Skills. Financial Valuation and Modeling. I hope you find this guide helpful about Equity Research Interview Questions that includes 50 (Technical as well as Non-Technical equity research interview questions with complete answers). Download BIWS Course sample videos here.
Equity Research Interview Questions With Answers Explained In Detail
Suggested Answer: Initiation of coverage indicates that one or more equity analysts will begin to provide sell-side research about a stock and make investment recommendations as a result of that research and recommendations. In the financial industry, coverage refers to the analysts' ongoing work of reviewing and reporting on a company's ...
Equity Research Interview Questions
Technical Questions. Technical questions form the backbone of an Equity Research interview, as they test your fundamental understanding of finance and accounting principles. Expect to answer questions on financial statement analysis, valuation methodologies (like DCF, comparable company analysis, precedent transactions), and ratio analysis.
Equity Research Interview Questions (Plus Answers)
Equity research interview questions with sample answers Effectively preparing for an interview can entail researching sample questions and formulating your own responses using a method such as the STAR method.The situation, task, action and result (STAR) method helps a candidate provide an honest and contextually accurate answer to each interview question.
36 Equity Research Interview Questions With Sample Answers
6 examples of equity research interview questions with sample answers To prepare for your interview effectively, it may be helpful to review questions with sample answers to plan your responses. Try to focus on using the STAR method in your answers, which describes the situation, task action and resolve.
Equity Research Interview Question With Answers- Intermediate Level
In this guide, we will explore a set of intermediate-level equity research interview questions and provide detailed answers to help you prepare for interviews in the field of equity research. These questions are designed to test your knowledge and understanding of key concepts related to financial analysis, valuation, industry research, and ...
9 Equity Research Interview Questions With Answers
Suggested Answer: Moreover, it can be demonstrated that the Price-Earnings multiple is driven by the ratio (1-g/ROE) / (r- g), where r represents the cost of equity, g represents the growth rate, and ROE represents the return on equity. A high-tech company's price-to-earnings ratio (PE) may be higher because investors expect the stock to grow more rapidly.
Equity Research
Equity Research Associate Interview Questions - The Stock Pitch. The stock pitch is arguably the most important and most common question you will be asked. It would be best to have 2-4 stocks in mind that you can pitch, i.e. large cap, small cap, stock to short.
36 Equity Research Interview Questions (With Sample Answers)
Pay attention to your body language, and be sure to make eye contact, smile, and sit up straight during your interview. 4. Practise with mock interviews. Practising for an interview is one of the most effective ways to prepare, reduce anxiety, and boost confidence.
Top 36 Equity Research Interview Questions (2024 Sample Answers)
Top 36 Equity Research Interview Questions (2024 Sample Answers) The role of an equity researcher is crucial to the financial sector. Recruiters may ask several technical and conceptual questions to determine if your qualifications and expertise fit the role. It is vital to prepare for an equity research interview by revising your fundamentals ...
Equity Research Recruiting: The Definitive Guide
Equity Research Interview Questions and Answers. Many of the standard "fit" questions will come up in equity research interviews: Your story, strengths/weaknesses, why equity research, team/leadership experiences, etc. ... The BIWS Interview Guide has 578+ pages of technical and fit questions & answers, personal pitch templates, 17 practice ...
Top 50 Equity Research Interview Questions and Answers
B) Providing research to clients and generating trading commissions. C) Handling customer service inquiries. D) Analyzing environmental impact reports. Answer: B) Providing research to clients and generating trading commissions. Explanation: A sell-side analyst works for brokerage firms or investment banks, offering research and analysis to ...
57 Equity Research Interview Questions (Plus Sample Answers)
In-depth equity research questions help the interviewer better understand your knowledge of investing. Investing is an important part of finances, and each professional can have a specific approach to investing situations and problems. Your answers can help the hiring manager determine if your approach complements company goals.
15 Equity Research Analyst Interview Questions (With ...
4. Have a plan - know what your goals are and stick to your plan. 5. Be patient - don't try to time the market, but rather invest for the long term.". In this article you'll find the most common interview questions with answers for equity research analyst. Get yourself ready for your upcoming interview.
50 Most asked Equity Research Analyst Interview Questions
Q.54 Define Free Cash Flow to Equity. Free Cash Flows to Equity can be defined as the amount of cash that is available to equity shareholders after deducting all expenses related to capital outlays, debts and taxes. Q.55 Explain the concept of "price-earnings growth (PEG) ratio" in Equity Research.
Equity research interview questions (Plus answers)
2. Pitch me a stock. Interviewers may ask candidates applying for an equity researcher position this question to assess their ability to analyse the stock market and use financial indicators. Furthermore, equity researchers may benefit from being familiar with the current state of the stock market.
Why Equity Research
Why Equity Research. Equity research (ER) is a position for analysts to evaluate a company's financial information and perform ratio analysis while forecasting future values by using applications like Excel to perform financial modeling. More specifically, this role intends to find optimized scenarios to either buy or sell stocks and form ...
Top 50 Equity Research Modelling Interview Questions and Answers
Equity research modelling is a critical aspect of financial analysis, involving techniques like Discounted Cash Flow (DCF) analysis, Comparable Company Analysis, Sensitivity Analysis, and more. In this guide, we delve into 10 distinct domains, each featuring multiple-choice questions, detailed answers, and explanations.

Equity Research Interview Questions (with Answers)

Equity Research Interview Questions

Table of contents

30 Equity Research Analyst Interview Questions and Answers

1. Can you explain the difference between top-down and bottom-up approaches in equity research?

2. What is your experience with financial modeling, and which types of models have you built?

3. How do you determine a company’s intrinsic value using discounted cash flow (DCF) analysis?

4. Describe your process for conducting industry and competitive analysis.

5. What are some key financial ratios that you use to evaluate a company’s performance?

6. Explain how you would analyze a company’s balance sheet, income statement, and cash flow statement.

7. How do you stay up-to-date on market trends and news relevant to the industries you cover?

8. Have you ever had to change your recommendation on a stock due to new information or changing circumstances? If so, please describe the situation.

9. What factors do you consider when determining a target price for a stock?

10. Can you discuss any recent mergers or acquisitions in the sector(s) you follow and their implications for the companies involved?

11. How do you handle situations where your investment thesis is challenged by colleagues or clients?

12. Describe your experience with earnings calls and investor presentations. How do you prepare for them?

13. What tools and resources do you use to conduct your research and analysis?

14. How do you prioritize your coverage universe and manage your time effectively?

15. What is your approach to risk management when making investment recommendations?

16. Can you provide an example of a successful stock pick you made and the rationale behind it?

17. How do you communicate your research findings and recommendations to clients or internal stakeholders?

18. Are there any specific sectors or industries that you specialize in or prefer to cover?

19. How do you incorporate macroeconomic factors into your analysis of individual stocks?

20. What role does technical analysis play in your overall research process, if any?

21. Can you explain the concept of beta and its relevance in portfolio management?

22. How do you assess the quality of a company’s management team?

23. What is your experience with using Bloomberg terminals or other financial data platforms?

24. Describe a time when you had to meet tight deadlines for multiple research reports.

25. Have you ever faced any ethical dilemmas in your role as an equity research analyst? If so, how did you handle them?

26. Can you discuss any recent regulatory changes that have impacted the equity research industry?

27. What are some challenges you foresee for the equity research profession in the coming years?

28. How do you ensure the accuracy and reliability of the information used in your analysis?

29. In your opinion, what qualities make a successful equity research analyst?

30. Can you provide an example of a situation where you had to defend your investment thesis against opposing views?

30 React Native Developer Interview Questions and Answers

Equity Research Interview Questions (Top 50 With Answers)

Technical Equity Research Interview Questions and Answers

Q.2: What is the earnings season?

Q.3: Describe the Equity Research Hierarchy

Q.4: What is the difference between Enterprise Value and Equity Value?

Q.5: What are the standard ratios used for company analysis?

Q.6: What is Financial modeling in Financial Analysis?

Q.7: How do you do a Discounted Cash Flow?

Q.8: How do you do Comparable Companies Analysis?

Q.9: What is Free Cash Flows?

Q.10: What is Free Cash Flow to Equity?

Q.11: What is Sensitivity Analysis?

Q.12: What is the use of Sensitivity Analysis in Equity Research?

Q.13: What are the common valuation multiples used in Equity Research?

Q.14: How do you compute the Weighted Average Cost of Capital for Discounted Cash Flows?

Q.16: What is BETA?

Q.17: Which is better between EBIT and EBITDA?

Q.18: What are the disadvantages of using the Price-Earnings Ratio?

Q.19: How does oil price changes affect our economy?

Q.20: Suppose your grandma’s broker told her to SELL already here Apple stocks, how would you react to this?

Q.21: How do you value a stock?

Q.22: If a company has a higher Price-Earnings ratio than another company, what could be the reason?

Q.23: What can you imply with a company that has a low PE multiple but a high EV/EBITDA multiples?

Q.24: Why is it sometimes necessary to unlever a beta?

Q.25: Is it possible for a stock to have an Equity Value that is higher than its Enterprise Value?

Q.26: What is the disadvantage of Discounted Cash Flows?

Q.27: Based on Warren Buffett, why are EBIT multiples more preferable than EBITDA multiples?

Q.28: Why do we use 5-10 years as the projection period for Discounted Cash Flows?

Q.29: What is the discount rate used in Discounted Cash Flows?

Q.30: How do you compute the terminal value in a Discounted Cash Flow?

Q.31: What is a mid-year convention in Discounted Cash Flows?

Q.32: Pitch me a stock.

Q.33: Tell me about a company that you admire, and that makes you buy a significant amount of its stocks.

Q.34: Suppose you have USD$1M, how would you invest it?

Q.35: What is the difference between Fundamental Analysis and Technical Analysis?

Non-Technical Research Analyst Interview Questions

Q.37: What keeps you motivated?

Q.38: Do you consider leaving your job in the future to start your own company?

Q.39: In equity research, what is the difference between analysts and associate?

Q.40: What skills are needed in equity research?

Q.42: How do you explain equity research to a 5-year old kid?

Q.43: What is the difference between sell-side and buy-side equity research?

Q.44: Why Equity Research and Are you prepared for stressful work?

Q.45: What does an Equity Research associate do?

Q.46: What does an Equity research Head do?