Lesson 4 of 7 · All lessons in this module
- Company research reports and the analysis framework
- Recommendations, target prices and the investment thesis
- The body of the report: business, peers, financials, valuation, risks and ESG
- Sell-side research: audience, constraints and incentives
- Buy-side research, stock screens and activist short sellers
- Hard-to-value stocks and the growth rate implied by the price
- Why analysts disagree: revenue, margins, investment and financing
This lesson is part of the 2027 curriculum. You are following the 2026 curriculum, where it is not taught in this form. Switch if you are sitting the exam under the 2027 curriculum.
Lesson 4 of 7 · 12 min
Sell-side research: audience, constraints and incentives
Sell-side research is written by investment banks and brokers for external clients; it follows standard formats, faces regulation designed to manage conflicts with banking and trading, and leans toward buy and hold ratings.
In short
- Sell-side reports go to external clients (institutional and retail investors, traders); buy-side reports support internal decisions at asset managers. The report elements are similar; the perspective differs.
- Sell-side research has broad coverage, standardised formats and commonly accepted models (DCF and multiples, with emphasis on earnings forecasts).
- Regulation separates research from investment banking and trading: analysts get no material non-public information, face quiet periods around offerings, and MiFID II makes asset managers pay for research separately from trading.
- Research is usually a cost centre, so firms choose coverage strategically, often favouring stocks with high trading volume; issuers value coverage because it reduces information asymmetry.
- Sell-side analysts are reluctant to issue sell ratings; consensus sell-side forecasts are a useful benchmark for the buy side.
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