Is role of equity research changed? - By: Ayaz Haider

If we say role of equity research is change, then might be this statement will be biased because equity research is same since first trade occurred. The change is occurred in markets; that basically influence the research. The basic role of the research is to provide information to the market, but if market changes time to time than, research patterns will also accordingly. Good markets mostly rely on information. Misinformation or lack of information leads the market towards misrepresentation of stocks. Means the values of stocks can be overvalued or undervalued. Researchers invest lot of time to understand the stocks, industry and its players to provide realistic and most nearest estimates. Research helps to fill information gaps prevailing in different markets and this helps investors understand over all market condition rather they study every stock separately. This process makes market efficient.
Role of research in Today’s Market:
Basically there are two types of researches: Wall Street research and other researches. Basic difference between Wall Street research and other researches are that, Wall Street research is mostly done by major brokerage houses, while other researches done by independent research firms and small brokerage botiques.
Wall Street always picks big caps and ignores the 60% of small publicly-traded stocks. Wall Street always focuses on very liquid stocks to create highly profitable investment deals, in order to generate higher bottom line. Mostly independent research firms and small brokerage firms focuses their research on those stocks that are ignored by Wall Street. Now, these days’ investors do not open account with brokerage firms because investors now more aware of the electronic trading and they are not ready to pay higher commissions and registered with boutique brokerage houses for their research.
Despite the fact that small firms are main source of information, investors are reluctant to pay for that because they are not sure of returns and accuracy of that until they purchased and get returns. But in today’s market investors are relying more on electronic means and they are not ready to pay extra commission.

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