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NISM Certifications · NISM-Series-XV: Research Analyst · Qualities of a Good Research Report

A report on a mid-size manufacturer states a Buy rating but does not mention key risks such as raw material price volatility and customer concentration. Which quality of a good research report is mainly missing?

The missing quality is a balanced discussion of risks. A good research report explains what could go wrong with the recommendation, such as input cost volatility or customer concentration, so investors can weigh the downside. Leaving risks out makes the Buy rating appear one-sided and less credible.

  1. ABalanced discussion of risks that could affect the recommendationCorrect
  2. BUse of a longer forecast horizon
  3. CInclusion of a larger number of charts
  4. DUse of more technical jargon

Explanation

A good report supports its recommendation and also discusses risks that could cause the outcome to differ. Omitting known risks makes the report one-sided. Charts, jargon and horizon length do not remedy this gap.

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