Common Interview Questions for Equity Researchers

Equity researchers conduct in-depth analyses of companies and market sectors to help their employers make investing decisions. On the sell-side, equity researchers work for investment banks, which use their research to issue buy and sell suggestions to clients. Equity researchers also help investment banks involved in mergers and acquisitions (M&As) value companies. Buy-side firms, such as hedge funds and private equity firms, hire equity researchers to research potential investments. Depending on the firm, the domain of an equity researcher might be broad, covering an entire security type, or it could be more narrowly focused on a particular industry or market segment.

Equity researcher positions are available for experienced professionals and new hires. Typically, new hires start as research associates and move up to research analyst role after gaining experience. The first step, however, is getting an interview and excelling in it. Prepare for your interview by learning the common questions asked of aspiring equity researchers and practicing winning responses.

A big part of your job as an equity researcher involves evaluating company financial statements and making determinations based on the information in front of you. While the data you are looking at is numerical and concrete, your methods for judging that data are entirely objective and probably differ, at least a little bit, from every other researcher in the industry.

Before bringing you on board, the interviewer wants an idea of the methods you use to make judgments based on company and industry data. What key metrics do you want to see before judging an investment as auspicious? Are there any benchmark ratios you use as frames of reference? What kinds of things immediately jump out at you as red flags? Prepare to have the specifics of your methodology probed, and be ready with organized answers that demonstrate why your research methods are successful and can make the company money.

While equity researchers tend to share skills and traits, such as keen logic abilities and quantitative acumen, they often bring diverse work experience to the table. Many researchers started at investment banks as bond salesmen or in equities, working directly with the bank's customers. This type of experience is valuable for an equity researcher because it offers insight into customers' mindsets. Knowing customers' wants and goals is an important base of knowledge when researching investments with customers' best interests in mind.

Other researchers lack experience working directly with customers but have worked in data analysis or other quantitative roles. This is valuable in a different way, and there is really no right or wrong answer when you are asked to talk about your background. Research the company and its mission, and be able to frame your past experience as having provided you with the skills to advance the company's mission.

In addition to uncovering your philosophies and probing your background, at some point your interviewer is likely to quiz you on your technical knowledge. They might, for example, put a sample balance sheet in front of you, give you a set amount of time to analyze it and then ask for your initial thoughts. Alternatively, they might ask you to highlight the differences between the price-to-earnings (P/E) ratio, earnings per share (EPS) and earnings yield. The possibilities for technical questions are endless, making it paramount that you understand financial statements frontward and backward before sitting down for your interview.

Assuming you feel your knowledge is sufficient, pick out a few financial statement features at random and practice giving concise, confident, organized descriptions of them. Once you learn to do this for a handful of terms, it becomes second nature. Regardless of what your interviewer throws at you, your response should sound polished.