Monday, July 21, 2008

Are buy-side analysts inferior?

Buy-side analysts aren't as good as sell-side analysts. At least not in the opinion of some researchers.

"...buy-side analysts made more optimistic and less accurate forecasts than their counterparts on the sell side," according to "Buy-Side vs. Sell-Side Analysts' Earnings Forecasts," an article by Boris Groysberg, Paul Healy, and Craig Chapman of Harvard Business School in the July/August issue of the Financial Analysts Journal.  

"The performance differences appear to be partially explained by the buy-side firm’s greater retention of poorly performing analysts and by differences in the performance benchmarks used to evaluate buy-side and sell-side analysts."

Do you buy the authors' conclusions?  

As of August 19, there's a poll on the right-hand side of this blog that will let you vote on the accuracy of buy-side vs. sell-side analysts. It's a temporary poll, so vote now! If you think the issues are too complex to be addressed by a poll, please add your comments below.


_________________
Susan B. Weiner, CFA
Investment Writing
Writing that's an investment in your success

Check out my website at www.InvestmentWriting.com or sign up for my free monthly e-newsletter.

2 comments:

  1. Thanks to all of those who responded to my poll!

    None of you agreed that buy-side analysts are less accurate than sell-side analysts.

    ReplyDelete
  2. Hi Susan,

    I am an buy side equity analyst with about 10 years of experience, recently I have accepted a position as a 'Head of Research'. I'll be heading an existing team of 7 buy side equity analysts. Since I am new in this role, I am seeking some guidance in order to succeed in this position.

    If I may, since you have considerable experience & expertise in equity research and also through your blog, can you please guide me with your views on what a New Head of Buyside Equity Research should & shouldn't do - be it in terms of technicals like kinds of reports to be prepared, models etc, managing,mentoring and appraising the research team, implementing change in the team, etc

    Any source of online & offline information that I can look into for successfully managing a equity research team and its research contributions to fund managers.

    I would appreciate your views on this.

    Warm Regards,
    Raj

    ReplyDelete

Note: Only a member of this blog may post a comment.