NISM Certifications · NISM-Series-XV: Research Analyst

Introduction to Research Analyst Profession: formula sheet

Full chapter guide

Key formulas

Core chain of the role: Data → Analysis → Valuation → View → Report → Decision support; Use this to place any function in the right stage.
Sell side vs buy side: Sell side: research published to clients | Buy side: research used internally by the investing institution; Remember who uses the output. That separates the two.
Scope of analysis: Economy → Industry → Company; A top-down view. Analysts look at each level before valuing a security.
Buy-side: Buy-side = research for own investment decisions; internal; no public distribution; Users: mutual funds, insurers, pension funds, PMS, AIFs.
Sell-side: Sell-side = research published for many clients; supports broking and other services; Producers: brokerages and investment banks. Usually carries a rating and target price.
Key test: Who uses it? Who pays? Is it distributed?; Internal and private points to buy-side. Distributed to clients points to sell-side.
Main risk of sell-side: Conflict of interest = research vs. banking or broking revenue; Needs disclosure of interest and independence from other business lines.
Fundamental analysis: Inputs: economy, industry, company data → Output: intrinsic value; Compare intrinsic value with market price. Usually longer horizon.
Technical analysis: Inputs: price and volume history → Output: trend and timing signals; Does not estimate intrinsic value of the business.
Quantitative analysis: Inputs: large datasets → statistical or mathematical model → rules-based signal; Defined by method. Data may be fundamental, technical or other.
Top-down approach: Economy → Industry → Company; Starts broad and narrows down.
Bottom-up approach: Company → (then industry and economy as context); Starts with company-specific strengths.
Process order: Objective → Idea generation → Data collection → Economy, industry, company analysis → Forecasting → Valuation → Recommendation → Report → Monitoring; Wording of steps varies by source, but the logical order does not. Valuation comes after analysis and forecasts.
Upside to target price: Upside (%) = (Target price − Current market price) ÷ Current market price × 100; Used to link valuation to a rating. Rating bands are set by each firm, not fixed by a universal rule.
Core report components: Rating + Target price + Horizon + Thesis + Financials + Valuation basis + Risks + Disclosures; A recommendation without its basis and risks is incomplete.
Core ethical qualities: Objectivity + Integrity + Independence + Diligence + Confidentiality; Most ethics questions ask which of these a given action breaches.
Conflict of interest rule: Avoid first; if unavoidable, disclose; Never conceal. Disclosure does not make a clearly improper act acceptable.
Reasonable basis rule: Recommendation = facts + analysis + documented rationale; A view without a supporting basis is a breach of diligence.
Certification validity: NISM certificate validity = 3 years from the date of examination; Applies to NISM certificates generally, including NISM-Series-XV.
NISM-Series-XV exam pattern: 100 marks, 2 hours, pass 60%, negative marking 25% of the marks of the question; 80 MCQs of 1 mark plus 5 case-based questions of 4 questions each at 1 mark.

Quick revision

A research analyst studies securities and markets and produces opinions or recommendations backed by analysis.
Buy-side analysts work for institutions that invest money, and their research is mainly for internal use.
Sell-side analysts work for brokerages and similar firms, and their research is distributed to clients.
Fundamental research studies economy, industry and company factors to estimate value.
Technical research studies price and volume patterns, mainly on charts.
Quantitative research uses mathematical and statistical models on data.
A research report should rest on a clear process: define the scope, gather data, analyse, conclude, then write.
Objectivity means your view should not be shaped by personal or employer interest.
Disclose any conflict of interest so the reader can judge the research fairly.
Read the question for the word that tells you the side: buy-side or sell-side.
Check marks per question, because a wrong answer costs a percentage of that question's marks.

Common mistakes

Treating the analyst as someone who guarantees returns. Fix: A recommendation is an opinion based on analysis. It carries risk and never guarantees returns.
Mixing up buy side and sell side because of the words. Fix: Sell side means the research is sold or supplied to clients. Buy side means the institution buys securities for its own portfolio and uses research internally.
Thinking buy-side means the analyst buys research from brokers. Fix: Buy-side firms buy securities for investment. Their analysts work inside that firm.
Calling a mutual fund's in-house research sell-side. Fix: Classify by how the research is used. A fund's own research guides its portfolio, so it is buy-side.
Saying technical analysis estimates intrinsic value. Fix: Technical analysis reads price and volume for trends and timing. Intrinsic value belongs to fundamental analysis.
Treating quantitative analysis as the same as technical analysis. Fix: Quant is a method using models on datasets. It can use fundamental data too. Technical is defined by price and volume charts.
Placing the recommendation before valuation. Fix: Remember the rating compares value with price. No valuation, no rating.
Treating data collection as the first step. Fix: Purpose and scope come first. They decide what data you need.
Thinking disclosure of a conflict makes any action acceptable. Fix: Remember: avoid first, disclose when unavoidable. Some acts, like trading ahead of a report, remain improper.
Treating objectivity and independence as the same thing. Fix: Objectivity is the quality of your own judgement. Independence is freedom from outside influence or relationships that could affect it.

Exam tips

Expect direct questions on functions of an analyst and the buy side versus sell side distinction.
Reject any option that promises returns or certainty.
For employer-based questions, link the analyst to the user of the research.
Use the economy, industry, company order to answer scope questions.
Read for words like 'primarily' or 'best describes', then pick the most complete fit.
Classify by use and distribution, not by the firm's name. Fund houses sell units but their research is buy-side.
Expect questions that give a scenario and ask you to name the side. Look for who the readers are.
Link sell-side with conflicts of interest and disclosure. Link buy-side with portfolio decisions.