Wall Street Research: Past, Present, and Future

Wall Street Research: Past, Present, and Future

Wall Street Research: Past, Present, and Future

Wall Street Research: Past, Present, and Future

Excerpt

Wall Street or sell-side equity analysts provide research products and services on publicly traded companies to institutional and retail investors (collectively referred to as the “buy side”) to help them make more profitable investment decisions. In supplying this research, sell-side analysts also provide a service to the companies they analyze by helping to create a liquid market for their stocks. As a result of their role as financial intermediaries that serve two distinct constituencies, each with its own agenda, sell-side analysts face inherent conflicts of interest.

During the last ten years the sell-side industry has been battered by a series of shocks. As concerns over conflicts of interest mounted, the integrity of its research output was questioned, leading to transformative regulatory changes. New technologies emerged to democratize information and change the way stocks are traded, threatening the industry’s product and business model. There were upheavals and stagnation in established core financial markets such as the United States, Japan, and Western Europe. And burgeoning new markets in countries such as China and India raised potential challenges to the dominance of leading firms.

Despite our common interest in the sell-side equity industry and in these changes, our areas of expertise are quite different. Boris’s prior research examines how financial intermediaries acquire, develop, and reward star sell-side analysts, whereas Paul’s focuses on the tools that enable sell-side analysts to develop insights into firms’ competitive positioning and to assess their values. Yet our fascination with the changes we have lived through during the last ten years brought us together to write this book.

Actually, we didn’t start out to write a book. Instead, over time we undertook a series of case studies, field interviews, and academic studies that we hoped would provide us with insights into the effects of the above . . .

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