Not only are your assertions lacking in proof, with all due respect, i’d submit that they are mostly nonsense. The fact that you haven’t employed certain tools personally does not nullify the acceptance or the use of such tools by the industry as a whole. – and i dare say, that it does not also imply that you’ve found the right or the best ways of covering stocks.
The objective of most Equity research is to assign value to a particular assets. There are tons of ways of doing this. It may be something as basic as looking for companies with monopoly like products and then simply buying them when the overall market is down or something as complicated as forecasting each element of growth and then discounting those back to the present. I have interviewed fund managers who took huge positions in their portfolios because they have a friend who worked for the company and told them the stock is a good buy.
The CFAs objective is to provide you with knowledge on as many tools as possible. The application of which totally depend on the analyst . In doing so, the institute continuosly collects and collates information on use of specific models- results of which are available in the CFAI textbooks. Additionally the CFAI materials are authored by veterans - People who are really f**king smart at what they do. Michael Porter himself wrote the fiver porters chapter in Equity Investments, and Faboozi authored almost all the chapters in Fixed Income. Regardless of what you think, these dudes are one of the very minor percentage of people who have been done valuations all their lives. If i were to follow their approach or yours, who do you suppose I’d pitch my tent with?
^ thefork isn’t just mouthing off… he’s speaking like someone who knows what they’re talking about. because i can definitely relate and understand where he is coming from.
i’ve done the spectrum of finance ER AM IB and while you can argue all you want about the “many tools as possible” the CFA program gives you, but the industry is such that it’s true you won’t use a vast majority of the stuff you learned.
it’s actually quite logical, because there’s no position I can think of (except CFA exam instructor) where you will literally be calculating and looking at heteroskedasticity one minute, then calculating the FRA market value by hand the next, and then analyzing GIPS later.
The CFA has migrated away from the “pure application” of finance into more theoretical areas that "may be used, or have been introduced’ to give you those tools. but realistically, are not widely used.
I agree with the poster that immediately followed your diatribe. His logic and reasoning was very sound.
There is a DRASTIC difference between what is taught in school/CFA and all the theoretical stuff and the REAL WORLD. My commentary was on what is ACTUALLY happening in the real world and how analysis is done in equity research, asset management and investment banking. I have been on a TWO person team that had $2 billion in AUM and I covered industrials in equity research, so I have real world experience to backup what I am saying, not just interviewing fund managers. I have been there and done that. Your post makes it very clear, though I may be wrong, that you are NOT in the investment industry, you might be in academia or trying to get in, or you might be in investments, but at a very low level, because you don’t seem to be in touch with what actually happens in investing. Though, as I said, I might be wrong. Professors and their theory sound great and are fun to read, but if you get out in the real world and actually work in investments you will find out that academia is pretty different from reality.
I am not going to get into some internet argument, because frankly, I don’t care what you think, and you are entitled to your opinion whether it be right or wrong, but I am speaking from EXPERIENCE…I don’t know if you are…
I stand by my statement that 90% of what you are made to learn to pass the CFA is material that you will never use or see again. Again, I am speaking from experience.
Your assertion on the purpose of Equtiy Research is laughable and proof that you have never worked in ER. The purpose of ER is to generate trades, mind share from the buyside, or IB business. It is about generating revenue, bottomline. As soon as I read your statement on ER, I knew you have never worked in ER, though I could be wrong.
Plus, I would venture to say that I am in a very select group that passed L1, while only reading 3 of the Schweser books and only studying for 2 weeks, so I can’t be that much of a dummy now, could I?
I would argue that unless you have specific evidence or information on how certain tools are applied - possibly from survey samples, it will be wrong to come to a conclusion that these areas of finance are realistically not widely used.
I know people who are not CFA instructors but work actively in product/quantitaive research roles that involves them actively thinking of how certain tools can be used together for specific purpose - and yes, that can involve looking at heteroskedasticity in one minuite, calculating the FRA market value by the next and working out the implied volatility on an index within the next hour.
Pure application of Finance knows no boundary. It is such a field that you can be as creative and as flexible as you want in your thinking and assumptions. Your experience from ER to IB seems very impressive, but that is not all there is, to Finance. Some people will consider useful, those tools you consider useless, what is more important is that the curriculum caters for a wide array of people and their specific interests.
Your post screams academia/theoretical and also infers you have never worked in a substantial role in investments. “Pure application of finance knows no boundary” seriously what fortune cookie did that come from? Relax, i am just having a little fun dont get worked up.
Have you ever worked in investments? If so what did you do?
I work in structured products and my role involve actively researching strategies. In MY OWN experience, those things I have learnt i found useful and several of them i found applicable.
Also, there are no “very select group” that can lay claim to passing while only studying for 2 weeks since this cannot be proven by any means. Experience has shown me that people have a natural tendency to embelish their own track records just to gain that feel good factor.
I will not continue with this debate, so have fun.
hey live long and prosper brother and in a few years i am sure you will stop drinking the kool aid and figure it all out on your own too. And regarding your veiled inference that I didnt pull it off in two weeks, it doesnt really matter whether you believe me or not, i dont care. Good luck on L2.
I am still laughing about your statement " The objective of most Equity research is to assign value to a particular assets." Do you still believe in Santa too? Your quote shows complete naivety and apparenty your naivety is not just confined to your view of ER.
I’ve been in the industry for 10 years working mostly in the derivatives trading world in various shops (S+T, Market Making, Asset Management, Counterparty Credit Risk modelling). My roles have been varied from Quant Developer to Business Analyst to Assistant Portfolio Manager.
My 2 cents to this argument is that I’ve gotten a LOT of benefit from the material. Obviously, I haven’t used all the material, and there are section of the material that have been more helpful than others, but I feel that ALL of the material is important to me and my career. The most random topics have come from the material at work. Just the other day someone was talking to me about the problem we were facing having to define a correlation matrix for 1500 assets (nXn problem). I suggested that we look into using the market model (a n order problem). I wasn’t able to fully explain to him the details and know the formulas, but I whipped out my books and showed him the material. This happens to me all the time with the material. I might NEVER need to know about FCF and Residual Income valuation and goodwill, etc, but when I hear people talking about this I’ll be able to at least know what they’re talking about. To me, this is important. I’ll know a little bit about everything and at least know where to look for more info.
I’m agreeing with both of you at the end of the day. You’ll only use 5% of what you learn in your day to day tasks, but little random snippets of the other 95% of the material come up all the time for me.