equity research
The analysis of publicly traded companies and their stocks, conducted by analysts at investment banks and research firms to provide investment recommendations.
Example
“The equity research report initiated coverage with a 'Buy' rating and $250 price target, citing strong free cash flow growth.”
Memory Tip
EQUITY RESEARCH = professional stock analysis. Analysts say BUY, SELL, or HOLD with price targets.
Why It Matters
Equity research helps individual investors make informed decisions about which stocks to buy or avoid. By understanding the quality and credibility of research reports, you can better evaluate investment opportunities and avoid relying solely on tips from friends or media hype.
Common Misconception
Many people believe that equity research is always objective and unbiased, but analysts at investment banks often face conflicts of interest since their firms also do business with the companies they cover. This can lead to overly positive recommendations even when fundamentals do not support them.
In Practice
An equity research analyst at a major bank publishes a report recommending ABC Corporation stock with a target price of 150 dollars per share, citing strong earnings growth. An individual investor reads this report and buys 100 shares at 120 dollars, but later discovers the analyst had not disclosed that the bank earns significant investment banking fees from ABC Corporation, potentially influencing the positive rating.
Etymology
EQUITY (stock) RESEARCH (analysis and investigation). In-depth RESEARCH into EQUITY investments.
Common Misspellings
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Related Terms
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See Also
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