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

Which of the following best reflects a good practice regarding the risks section of a research report?

A good risks section discusses the factors that could cause actual results to differ materially from the analyst's forecast and recommendation. It should be specific and present for every rating, including Buy, so that readers get a balanced view rather than generic or one-sided commentary.

  1. AIt should discuss factors that could cause actual results to differ materially from the recommendationCorrect
  2. BIt should be omitted when the rating is Buy
  3. CIt should contain only generic market risk statements copied across reports
  4. DIt should list only risks that have already materialised

Explanation

A balanced report identifies company-specific and external risks that could make the outcome differ from the forecast, whatever the rating. Omitting risks for Buy ratings, or using boilerplate, makes the report one-sided and less useful.

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