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

Which of the following best describes a research report that gives a clear 'Buy' recommendation but does not mention any risks to the investment thesis?

A report that gives a Buy call without mentioning risks is deficient. A good research report must be balanced and disclose the key risks that could invalidate the thesis, so readers can judge the recommendation fairly and not be misled by a one-sided view.

  1. AIt is balanced, because a clear recommendation is the main purpose of the report
  2. BIt is deficient, because a good report must disclose the key risks that could make the thesis failCorrect
  3. CIt is compliant, because risks need to be disclosed only in oral communication
  4. DIt is superior, because mentioning risks confuses readers

Explanation

A good research report presents a reasoned view along with the main risks and uncertainties, such as regulatory, competitive and execution risks. Leaving out risks makes the report one-sided and misleading to the reader. Disclosure of risks is not limited to oral communication.

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