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

Which of the following is the most appropriate way for a research report to present a risk to its recommendation?

A good report identifies the specific key risks that could cause its estimates or target price to be wrong and discusses their potential impact. Omitting risks, listing only improbable ones, or giving a generic risk warning leaves readers unable to judge how reliable the recommendation is.

  1. AOmit risks to keep the message simple
  2. BMention only risks that are unlikely to occur
  3. CIdentify the key risks that could make the target price or estimates go wrong and discuss their potential impactCorrect
  4. DState that all investments are risky without detail

Explanation

A good report discusses specific risks that could change its estimates or valuation and their likely impact, which helps readers make informed decisions. Omitting risks, listing only unlikely ones or giving a generic statement does not meet this standard.

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