“[Equity] research in commotion: Is it getting harder for securities analysts to pay their way?”

The Economist would like you to think that the answer is still up in the air: while on the one hand, sell-side research budgets are shrinking –and in some cases disappearing altogether– on the other, a recent study* comparing the accuracy of a single buy-side firm’s recommendations to that of a sample of sell-side recommendations shows that the single buy-side firm is less accurate than the sample of sell-side firms.

The authors of the paper* attempt to establish the validity of their conclusion by comparing the stated performance of a sample of buy-side firms to that of sell-side ‘buy’ recommendations. The major flaw in this paper is not that the sample size consists of one, but that the authors characterize the buy-side as a consortium of long-only mutual funds, and altogether ignore

The sell-side saga continues: new hires

They were like ducks I once saw on a corporate hunt that were trained to fly repeatedly over the same field of hunters until shot dead.  You didn’t have to be Charles Darwin to see that this breed was doomed.
Michael Lewis, Liar’s Poker

As we prepared a termination report for another of our companies lost to the LBO (bringing the sum to a disheartening number), our firm welcomed two new hires –today. Next week we welcome another.