Why Equity Research?
One of the most common qualitative questions you should prepare for when interviewing for a role in equity research is “Why Equity Research?”.
The core strategy of answering this question is similar across different jobs in finance. As we highlighted in our “Why Investment Banking?” blog post, it’s extremely common that an interviewer will ask you “Why this firm?” or “Why Equity Research?” after you walk through your resume.
Your answers to any of these questions are likely to highlight similar themes with the goal of presenting your past experience as part of a logical series of steps leading you to this interview. You’ll be ready for the qualitative side of the interview if you have a good answer to these three questions:
Walk me through your resume (your full story and key work experiences)
Why equity research (why your past experiences and aptitudes logically lead to a career in equity research, and why you are pursuing this vs. other jobs in the capital markets)
Why this firm (why do you want to do equity research at this firm in particular?)
To better prepare for an upcoming interview or learn how to best position yourself to break into the industry, you should check out our Equity Research Course and our Equity Research Overview blog post.
How to Answer This Question
It’s arguably easier to identify realistic-sounding reasons why you see yourself working in equity research compared to other jobs in finance such as investment banking. By nature, part of the job is more widely seen by the general public and is often televised. For example, you may have seen talking heads on business news channels like CNBC or BNN (in Canada) interview equity research analysts about their views on a stock they cover. Actually investing in stocks is also very accessible to the general public.
The benefits of starting a career in equity research include more direct exposure to the stock market, speaking with different types of investors, and becoming a subject matter expert, all of which can arguably set you up to be a good investor in public equities. Just as we mentioned in our “Why Investment Banking?” post, a good answer to the “Why Equity Research” question is about picking a few elements to highlight that fit in your story which would be personal, authentic-sounding, and draw upon unique elements in your life.
Your answer can be more impactful if it touches on a few important points without dragging on. As a rule of thumb, a good answer to this question will:
Be 30-60 seconds in length
Highlight 2 or 3 discrete points
Relate to unique personal experiences or characteristics
Generally, this question is better when answered more concisely. I would aim for 30-45 seconds in which you would spend 15-20 seconds on each point you bring up.
Crafting your answer around actual details in your life will make your desire to get the job much more believable.
For example, let’s say you were an analyst in your school’s investment club covering stocks within the Technology sector.
“I was the lead Technology analyst in my school’s investment club which has $2 million of assets under management. One of the stocks I looked at closely was Nvidia, which led me to learn about some really diverse industries and trends such as gaming, artificial intelligence, and cryptocurrency, to come up with a view on how the business might perform in the future. I really love the detective work aspect of understanding a company. I’m excited to pursue a career that rewards intellectual curiosity and promotes creativity in both asking and answering questions.”
Maybe you weren’t part of any investment group in your school but traded stocks using your own money.
“I’ve been managing my own portfolio which generated a +4% return this past year relative to the S&P 500’s -16% return. I love learning about many industries and following macro trends to build a diversified portfolio. Looking into individual stocks got me really interested in navigating the opposing views of different investors in the market. I want to further my skillset in analyzing specific companies in order to be part of the conversations around individual stocks."
What if you didn’t have access to money to trade actual stocks?
"This past year, I’ve managed a mock portfolio which beat the S&P 500 by 5%. I really enjoyed learning about different companies and making investment decisions on my own research. Specifically, I enjoyed the open-ended and creative nature of formulating an investment thesis around a stock, and I found it rewarding to see stocks move in line with my predictions. I’m excited to pursue a career which rewards intellectual curiosity, and where your work can be compared against actual results frequently."
We’ve highlighted some of the most common answers to this question for a career in equity research below. You can pick some of the points below that you think you can tie to a specific experience or trait of yours. Aim to pick two or three, depending on how much support you have for each one.
Common Answers for "Why Equity Research"
Rewards intellectual curiosity
Great learning experience
High degree of responsibility early in your career
Relevant internship / club experience / personal experience
Enjoy investing your own money
Allows you to speak with different types of investors
Gives you exposure to many different investing styles
Lots of modeling experience
Opportunity to become an expert in an industry
Work with smart and motivated people
Want to work as part of small and focused teams
Opportunities for collaboration across geographies and different teams
The list of answers above is by no means exhaustive, but it covers most of the answers people will say. Don’t be afraid to use points that aren’t extremely original.
What sets answers to the “Why Equity Research” question apart is the creativity in connecting these answers to actual events or experiences in your life.
Simply saying that you “want to learn a lot” is a bad answer. A good answer would be if you say you were part of your school's investment club, and your favorite part of the role was the opportunity to learn and present your findings on many different companies to an interested audience.
Make sure to avoid saying points that contradict your own experience or story, or the actual nature of the job itself. For example, don’t say that you want an opportunity to invest actual money in equity research, as the job entails advising clients whether to buy or sell certain stocks. If your goal is to move to the buy side (invest actual money), frame your answer around your interest in analyzing stocks and companies, instead of generating a return on your capital.
Understand the differences between jobs across a bank’s capital markets division and how they interact with one another. This will help you ensure that your answer doesn’t more closely align with a different job compared to equity research. We cover the different functions of a bank’s capital markets division and equity research’s role within the broader bank in our course here.
Here are a few more examples that you can use as inspiration or repurpose:
“I’ve been interested in equity research ever since joining my school’s investment club. An associate at your firm actually helped judge the students’ stock picks and was generous with her time to talk with everyone about the details of the job after the presentations. I remember being really excited about how she explained the open-ended nature of coming up with interesting trade ideas, and how creative you can be when finding data supporting or contradicting a thesis.”
“I’m majoring in finance and statistics, and have had the opportunity to build company models. I was really impressed with seeing how detailed some equity research models can be, and how data plays a huge role in building a good model. I’m really interested in data-driven decision making, and how equity research merges the fundamental analysis of companies’ operational performance with market psychology to pick stocks.”
“After speaking with a few equity research analysts, the thing I’m most excited about in equity research is the variety and depth of the work. I find it really fascinating how research analysts develop and publish original ideas on stocks, speak with and build relationships with investors, meet and learn from senior company executives, and even work on IPOs. I’ve enjoyed learning about a lot of different topics from taking a wide range of classes at college ranging from history to finance, and believe I would really love working in such a dynamic role.”
“I’ve enjoyed working on my master’s thesis since it allowed me to dig deep into one topic over a long time. I’ve noticed that Goldman Sachs has put out a lot of interesting and extensive thematic research reports focusing on specific trends and industries. I think it would be a really exciting opportunity to contribute to research identifying important trends which could impact companies in the future.”
“I’ve been interested in the stock market for several years, and think that being involved in company and industry research would be fascinating. Having taken a few psychology and behavioral finance classes, I would love to blend the technical aspects of modeling and company analysis with the psychological analysis of market participant behavior.”