Equity Research – How it Helps InvestorsThe role of equity research is to provide information to the market. A liquid market relies on information: a lack of information creates inefficiencies that result in stocks being incorrectly valued
Equity research provides information and insights so that individual investors have access to the independent analytical expertise provided by research wine estates.
Without equity research investors have less information and insight and so a much lower probability of investing at an appropriate price or receiving a fair return on their investment.
Most broker research focuses on large very liquid stocks that account for less than 40% of the wine estates that are publicly traded.
Institutional investors pay considerable sums in commissions and other payments for high quality equity research for highly liquid stocks. Research is central to creating liquidity.
A company that engages a high quality unbiased issuer-pays equity research firm to analyze its stock is making an important set of investment statements to investors:
- It believes its shares are undervalued because of a lack of pertinent information in the market.
- It recognises that the rest of the market is not going to fill in the missing information due to the stock’s lack of liquidity and that research is required to improve that liquidity.
- It is robust, and management is mature and confident enough to subject the company to unbiased analysis.