Life in Equity Research

I’ve been working as an Associate in Equity Research for almost three months and I’m loving every minute of it. The hours are great for a job in high-finance, 12 hours a day, Monday to Friday and the very occasional Saturday. And surprisingly, its never really been that bad. It really does help that not only do I enjoy what I’m doing, but I’ve also been given a huge amount of responsibility so I know what I’m doing is really worthwhile.

Three simple but important things I should keep in mind for any future jobs:

1. Whenever you ask any questions, prepare for it as if you’re going for an interview. That means exploring all avenues and making sure you know the topic inside out. You don’t want to come out sounding like an idiot.

2. Work late hours but more importantly, especially for myself, wake up early. I don’t mind working late, but I do have trouble waking up in the morning so I’ve got to try sleeping earlier and starting work earlier. It’ll be less applicable for investment banking but its always good to get as much sleep as possible. You’ll never know when you need it.

3. Double-check work. It doesn’t matter how confident you are that everything is correct. There is ALWAYS SOMETHING WRONG. It always pays to double-check work. Especially since you do a lot of work when you’re half-asleep. You don’t want spelling, formatting or formula errors in anything you do because you want a record of doing quality work.

And lastly, something that I’ll try to keep in my job next summer. Keep a log book of everything you have learned, and mistakes you have made. Nobody can remember everything (perfect example here) and you don’t want to be making the same mistakes all over again.

So sadly, theres just one more month of this and I’ll be back in school, and there will be regular updates again…

Hiatus

Well that back to writing bit didn’t last long. I’ll be working in equity research at a boutique investment bank over the summer so I’ll be on hiatus or at least updating very irregularly until school starts again in September. Can’t exactly publish research for my firm and on my website at the same time…

The Risk-Reward Ratio in Brokerage Jobs?

I was talking to a Managing Director in Equity Research about the differences between investment banking and equity research and realized that there’s a lot more risk in equity research than investment banking.

I’ve always assumed that there was a proportionate risk to reward ratio for most brokerage jobs. Sales and trading with a large inherent risk (losing your job if you don’t do well) would have the largest possible rewards (large juicy bonuses). On the other hand you have investment banking which is considerably more risk averse (you can’t single handedly lose $7.2 billion), thus having a smaller compensation range.

But this seems to stop holding true for equity research. You’re putting your neck on the line when releasing analyst reports. These reports should be right more often than not. If not, it won’t take long to be out of a job… Thats definitely a lot more pressure than filling in commas and double-checking models in investment banking.

Yet investment bankers get paid a lot more. Why? There’s probably some reward that is more intangible than cold hard cash so I added working hours to the mix.

Even though they’re both brokerage jobs, its probably unfair to be comparing research with investment banking since the jobs aren’t that similar. One could just like doing stock analysis rather than endless DCF models. And of course theres a lot more involved than hours and compensation. But from a purely financial point of view, it certainly makes the risk reward graph look a lot more logical.

EDIT: Goldman Sachs’ chief investment strategist (Equity Research), Abby Cohen has just been demoted for painfully wrong predictions… It just goes to prove that equity research seems to have a disproportional risk to its reward…