Editing Financial analyst (section)

===Securities firms===
{{Main|Securities research}}

In a stock [[brokerage]] house or investment bank, the analyst will<ref name="Dahlquist" /> read company financial statements -  applying [[financial analysis|financial statement analysis]]  -  and analyze commodity prices, sales, costs, expenses, and tax rates in order to [[Business valuation|determine a company's value]] and project future earnings. On the basis of their results, they [[Research report|write reports]] and make presentations, usually making recommendations—a "[[trade idea]]"—to buy or sell a particular investment or security.

Typically, at the end of the assessment, an analyst would provide a rating recommending or investment action: to buy, sell, or hold the security. Senior analysts may actually make the decision to buy or sell for the company or client if they are the ones responsible for managing the assets. Other, "junior" analysts use the data to model and measure the financial risks associated with making a particular investment decision. See {{slink|Securities research#Career path}}.

Usually, financial analysts study a specific industry—called "[[Securities research#Analyst specialization|sector specialists]]"—assessing current trends in business practices, products, and industry competition.<ref name="collegegrad.com 2" /> Among the industries with the most analyst coverage are [[biotechnology]], [[financial services]], [[Energy industry|energy]], [[mining]] and resources, and computer hardware, software and services. Analysts must keep abreast of new regulations or policies that may affect the industry, as well as monitor the economy to determine its effect on earnings. As equity analysts divide securities by distinct sectors, companies which fall outside or across multiple sectors are sometimes [[Neglected firm effect|neglected]]; the impact on returns (and on "[[earnings management]]") here is debated.<ref>{{cite journal |jstor=10.1086/210178 |title=The Categorical Imperative: Securities Analysts and the Illegitimacy Discount |first=Ezra W. |last=Zuckerman |s2cid=143734005 |date=18 May 1999 |journal=American Journal of Sociology |volume=104 |issue=5 |pages=1398–1438 |doi=10.1086/210178 }}</ref><ref>Laura Lindsey, Simona Mola (2013).[https://www.sec.gov/files/rsfi-wp2013-04.pdf Analyst Competition and Monitoring: Earnings Management in Neglected Firms], DERA Working Paper 2013-04</ref>

Analysts also specialize in fixed income. Similar to equity analysts, ''fixed income analysts'' [[Bond valuation|assess the value]] and [[Corporate bond#Risk analysis|analyze the risks]] of various securities, here focusing on [[Interest rate derivative|interest rate-]] and [[Fixed income security|fixed income securities]], particularly [[Bond (finance)|bonds]]. They may further specialize, but here by issuer-type: i.e. [[municipal bond]]s, [[government bond]]s, and [[corporate bonds]]; the latter specialization is often decomposed into [[convertible bond]]s, [[High-yield debt|high-yield bonds]], and [[Distressed securities|distressed bonds]]; some cover [[syndicated loan]]s. The reporting focuses on the ability of the issuer to make payments—similar to the credit analysis [[#Credit analysts|described below]]—but also on the [[Bond valuation#Relative price approach|relative value]] of the security in question, and in context of the overall market and [[yield curve]]. See [[Fixed income analysis]].

Analysts are generally divided into [[Sell-side analyst|'sell-side']] and [[Buy-side analyst|'buy-side']].  The buy-side is sometimes considered more prestigious, professional, and scholarly, while the sell-side may be higher-paid and more like a [[Sales and trading#Sales|sales and marketing role]].  It is common to begin careers on the sell-side at large banks then move to the buy-side at a fund.

* A sell-side analyst's work is not used by its employer to invest directly, rather it is sold either for money or for other benefits by the employer to buy-side organizations. Sell-side research is often used as 'soft money' rather than sold directly, for example provided to preferred clients in return for business. Writing reports or notes expressing opinions is always a part of "sell-side" (brokerage) analyst job and is often not required for "buy-side" (investment firms) analysts. It is sometimes used to promote the companies being researched when the sell-side has some other interest in them, as a form of marketing, which can lead to [[Conflict of interest|conflicts of interest]].
* A buy-side analyst,  such as a [[fund manager]], works for a company which buys and holds stocks itself, on the analyst's recommendation.  As they gain experience, analysts often move from buy-side research, concerning individual securities and sectors, into [[Portfolio manager|portfolio management]] itself, selecting the [[Asset allocation|mix of investments]] for a [[Investor#Institutional investor|company's portfolio]].  They may also become fund managers and manage large investment portfolios for [[Investor#Retail investor|individual investors]].

Typically, analysts use [[financial statements]] analysis, including accounting analysis and [[ratio analysis]], but also consider overall economic situation and specific factors including interest rates, employment, production, management and tactical evaluation of the market environment. Analysts obtain information by studying public records and [[SEC filing|filings by the company]], as well as by participating in public [[earnings call]]s where they can ask direct questions to the management. Additional information can be also received in small group or one-on-one meetings with senior members of management teams. However, in many markets such information gathering became difficult and potentially illegal due to legislative changes brought upon by corporate [[Accounting scandals|scandals]] in the early 2000s. One example is [[Regulation FD]] (Fair Disclosure) in the United States. Many other developed countries also adopted similar rules.

Analyst performance is ranked by a range of services such as StarMine owned by [[Thomson Reuters]] or Institutional Investor magazine. Research by [[Numis]] found that small companies with the most analyst coverage outperformed peers by 2.5 per cent — while those with low coverage underperformed by 0.7%.<ref>{{cite web |last=Walker |first=Owen |date=2018-02-03 |title=Brokers and Managers Grapple with Mifid 'Inducement' Rule |url=https://www.ft.com/content/473a37a8-1720-11e8-9376-4a6390addb44 |website=[[Financial Times]]}}</ref>
See [[Neglected firm effect]].