ST: Analysts miss the mark over longer term

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Based on my experience conversing with analysts who used to work with financial institutions, I doubt their poor predictive performance has much to do with a lack of conviction. It's simply a matter of inexperience and incompetence at the executive level.

My gut sense is that these are primarily pretty junior staff whom people are listening to because they happen to publish their research with a recognizable letterhead.

If you think about it, in order for an analyst to have a compelling view of a company's long term performance, he needs to think on the CEO and BOD level as we are really talking about business strategies, talent strategies, capital allocation and a discerned understanding of enterprise risk.

Contrast this to a typical analyst who is usually a junior freshie with a couple of years experience. Even a head of research in a typical bank is usually only a SVP, the equivalent to a mid-level manager in a normal MNC. The public and media places undue attention on their reports which they normally wouldn't if they had published the same reports on an individiaul basis.

Why any bank needs to pay for such nonsense is of course a subject for further discussion, but once we view this whole sell side analyst business in this perspective, it becomes readily apparent that our expectations for them to be accurate are misplaced.
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RE: ST: Analysts miss the mark over longer term - by mobo - 14-02-2013, 09:47 AM

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