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

A research analyst's report states a target price of Rs 500 for a stock but does not mention the valuation method, the key assumptions or the risks that could make the target fail. Which quality of a good research report is mainly missing?

The missing quality is adequate disclosure of the basis, assumptions and risks behind the recommendation. A reader must be able to see how the target price was derived and what could go wrong, so an unsupported target price makes the report weak and hard to evaluate.

  1. AAdequate disclosure of basis, assumptions and risks supporting the recommendationCorrect
  2. BA larger number of charts and tables
  3. CA longer executive summary
  4. DA more optimistic rating

Explanation

A good report must support its recommendation with the method used, the assumptions made and the risks involved, so that the reader can judge it independently. Without these the target price is an unsupported claim. Charts, length or optimism do not fix this gap.

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