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

An analyst's report on a company says, 'The company will certainly double its profits next year and the stock cannot fall.' Which feature of a good report does this statement violate most directly?

The statement violates the requirement that research be fair, balanced and not misleading. Assuring certain profit doubling or that a stock cannot fall ignores risks and amounts to a guarantee of outcomes, which a good, objective research report must never give.

  1. AUse of a clear rating scale
  2. BFair, balanced and not misleading communication, without guaranteesCorrect
  3. CInclusion of a summary at the start
  4. DUse of peer comparison

Explanation

Research must be fair, clear and balanced, and must not promise or assure returns or certainty about the future. Words like 'certainly' and 'cannot fall' ignore risks and mislead investors. Summaries and peer comparisons are acceptable features, not violations.

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