40 common equity research interview questions. Examples include technical, transactional, behavioral, and logical tests with sample answers
Equity Research (ER) hires new and experienced professionals from all over the world with a wide range of talents and skill sets who want to have a fulfilling career. People who just graduated from school will start as research associates and work their way up to become research analysts after some time in the field.
Due to the large number of applicants and the small number of positions available, it is not surprising that the interview process is set up to be very tough.
So, the key to turning an interview into an offer is to answer the technical and behavioral questions with confidence and consistency. So, the best way to get ready for these interviews is to follow the markers, learn how to answer the most common questions (which we’ll talk about below), and practice, practice, practice.
That being said, the free WSO ER interview guide below is a complete resource that will walk you through every step of the ER interview process, from the start to the finish. This interview guide will drastically improve your chances of securing an offer with your dream job.
As part of the hiring process, hedge funds ask candidates 40 of the most common behavioral, technical, and logical questions. Our guide includes sample answers that have been shown to work.
We really think it’s a great place to start getting ready before you buy our more in-depth Hedge Fund Interview Course.
This resource features 13 firm-specific questions from leading hedge funds (Citadel, Bridgewater Associates, etc. ) and proven sample answers to them.
Successful people in the equity research field can make themselves look like the best candidates for the job by showing that they are interested in money and have a strong work ethic. A candidate’s presentation of themself occurs at the beginning of the interview, often through these two questions. We can guarantee that these standard questions will be asked, no matter the company, the job, or the place.
Knowing what to expect from these two questions before the interview, being good at making a compelling story around them, and selling yourself will help you stand out from other applicants.
An investment research analyst plays a vital role in the financial sector by providing in-depth analysis and recommendations to guide investment decisions. As such the interview process for this coveted position aims to thoroughly assess your financial acumen, analytical abilities communication skills and professional judgement.
To help you shine in your upcoming interview, we’ve compiled the top 30 commonly asked investment research analyst interview questions along with sample responses. Read on to get insights into the knowledge and capabilities employers look for so you can craft winning answers that highlight your qualifications.
1. Walk me through how you developed an investment thesis and how it played out.
Interviewers ask this to evaluate your thought process and ability to identify promising investments. Demonstrate your analytical approach by walking through a thesis you created, the logic behind it, and how the investment performed. Explain key factors you considered and any lessons learned.
Sample Answer “Recently, I built a thesis around electric vehicle stocks due to shifting consumer preferences and government incentives After analyzing financials of leading manufacturers, I identified several companies well-positioned to benefit from the EV boom. This led me to recommend investing in Tesla early on given its first-mover advantage The stock appreciated significantly as EV adoption accelerated, validating my analysis.”
2. How would you assess a company’s financial health?
Hiring managers want to know that you can thoroughly evaluate a company’s profitability, liquidity, leverage and other financial indicators. Discuss key metrics you examine, such as revenue growth, margins, debt ratios and cash flow. Emphasize the importance of qualitative factors as well.
Sample Answer: “I dig deep into financial statements to assess revenue and profit trends, liquidity, debt levels and working capital efficiency. Key ratios I examine include profitability ratios, liquidity ratios and solvency ratios. However, financials only reveal part of the picture, so I supplement my analysis by evaluating business model, competitive landscape and management team.”
3. Walk me through a complex financial model you have built.
Demonstrate your financial modeling skills by outlining the purpose, structure and functionality of a robust model you created. Explain how you incorporated projections, built scenarios and leveraged the model to derive actionable insights. Showcase your expertise with Excel or related programs.
Sample Answer: “I built a 30-page DCF model to value a mid-cap pharmaceutical company as a potential acquisition target. It integrated historical financials, projected future performance based on drug pipelines, calculated weighted average cost of capital and applied sensitivity analysis to test various scenarios. The output helped determine a fair valuation range to guide negotiations.”
4. Tell me about a time you had to present an unpopular investment opinion. How did you handle objections?
Show interviewers that you can firmly stand your ground when your analysis contradicts conventional thinking. Outline your investment thesis and how you presented compelling evidence to support your perspective. Share how you professionally handled any objections while maintaining confidence in your position.
Sample Answer: “When our team was bullish on an automaker, my analysis pointed to overvaluation. I walked through red flags I identified like declining market share and high costs. Despite skepticism initially, I calmly reiterated my findings. My solid analysis convinced them to avoid a risky investment, affirming the value of an objective perspective.”
5. What is your approach to risk management in investment analysis?
Share the risk management strategies and tools you leverage, such as scenario analysis, stress testing, diversification and hedging. Demonstrate you understand the importance of balancing risk versus reward and guarding against common cognitive biases. Convey your experience implementing effective risk practices.
Sample Answer: “I incorporate risk management throughout my process from screening investments to constructing portfolios. This involves assessing volatility, modeling worst-case scenarios and optimizing asset allocation to minimize concentrated risks. I also adhere to stop-losses, maintain cash reserves and size positions appropriately within risk limits.”
6. How do you stay current on financial news and market developments?
Highlight the diverse resources you leverage to continually broaden your knowledge, such as financial newspapers, research reports, regulatory filings, earnings calls and industry conferences. Underscore your commitment to ongoing learning in this fast-evolving field.
Sample Answer: “I start my mornings reviewing market movers and sector news in the Wall Street Journal. I also regularly analyze 10-K and 10-Qs to understand company performance. Throughout the day, I engage with my network, attend webinars and set Google Alerts to receive news on my sectors. This multi-pronged approach ensures I stay updated on trends shaping markets.”
7. Tell me about a time your investment analysis was incorrect. What lessons did you learn?
Demonstrate humility and growth mindset by transparently discussing an investment thesis that didn’t pan out as expected. Outline what assumptions or factors you misjudged. Convey key learnings that improved your rigor and perspective for future analyses.
Sample Answer: “I underestimated the speed at which digital disruption would impact brick-and-mortar retail. This led me to remain bullish on a major retailer longer than prudent. In hindsight, I focused too much on legacy brand value versus shifting consumer behaviors. This taught me to pay closer attention to how technological changes can rapidly transform industries.”
8. How do you determine if a stock is undervalued or overvalued?
Succinctly walk through your valuation process, such as analyzing P/E ratios relative to competitors, examining projected growth rates, calculating discounted cash flows and leveraging valuation multiples. Emphasize the importance of synthesizing quantitative and qualitative factors.
Sample Answer: “I developed a multi-pronged framework for valuations. I forecast revenue and earnings based on TAM analysis, competitive dynamics and market growth. I build DCF and comparable models to derive price targets, which I cross-check with relative valuation metrics versus peers. Additionally, I meet company management to gauge intangibles impacting value like culture and vision.”
9. What experience do you have with quantitative and qualitative analysis?
Discuss financial and statistical models you are proficient with such as DCF, Monte Carlo simulations and regression analysis. Also highlight your ability to discern insights from earnings calls, assess management execution and evaluate hard-to-quantify competitive advantages. Demonstrate your versatility.
Sample Answer: “In addition to building robust valuation models, I gather critical insights through shareholder letters, customer reviews and industry conferences. While quantitative skills allow me to forecast and optimize, qualitative techniques help me understand the context driving numbers andcompetitive positioning. This balanced approach yields comprehensive insights.”
10. Share an example of how you used data analysis to make an investment recommendation.
Walk through a situation where you leveraged analytical techniques to unlock insights from company or market data. Explain how you made connections others missed. Demonstrate how you translated complex analysis into sound investment advice.
Sample Answer: “While our team was bearish on Software-as-a-Service stocks, my regression analysis revealed these small caps consistently outperformed during periods of rising rates. Recognizing most SaaS firms fall into this category, I argued shifting macro conditions warranted a closer look. My data-backed recommendation led us to uncover promising opportunities we had overlooked.”
11. How would you reconcile conflicting data points or research methodologies?
Highlight analytical mindset and critical thinking skills by outlining how you would troubleshoot and resolve data discrepancies. Discuss factors you would investigate to determine the most reliable facts and figures. Demonstrate sound judgment.
Sample Answer: “If two trusted sources presented contradictory numbers, I would first verify methodologies used and probe what factors could explain inconsistencies. For example, differing timeframes or underlying assumptions. I would determine which methodology is most appropriate for our needs. If uncertainty remains, I present both data points along with caveats.”
12. How do you ensure your analysis and assumptions are accurate?
Underscore your commitment to excellence by detailing quality control practices you implement such as substantiating figures across multiple sources, peer review of models, backtesting forecasts against outcomes and ongoing calibration of assumptions against market trends.
Sample Answer: “Accuracy is critical, so I cross-verify data points through company filings, equity research from reputable firms and industry benchmarks. I also constantly re-evaluate assumptions as new information emerges, carefully tracking how projections match actual results over time. My manager reviews samples of my models to further safeguard quality.”
13. What financial analysis software and tools are you proficient in?
Demonstrate technical prowess by listing specific programs you leverage and your depth of experience with each. These may include Bloomberg, FactSet, Capital IQ, R, MATLAB, Oracle, or proprietary applications. Highlight how these tools strengthen your efficiency and capabilities.
Sample Answer: “I’m highly proficient in a range of applications. Bloomberg and Capital IQ are my go-to’s for market data. I leverage SQL and Tableau for data analysis and visualization. I build models in Excel, with advanced skills in sensitivity analysis, goal seek and index/match. I also have experience with machine learning platforms like BigML and RapidMiner.”
14. How would you explain a complex investment strategy in simple terms to a client?
Showcase communication skills vital for client interactions by summarizing
1 Where do you believe the stock market will be in future, say 3/6/12 months from now?
Sample Answer:
- This question can show your interest in the markets. Any answer is fine because everyone has their own thoughts on where the market is going.
- When you give an opinion, you need to have a good reason for it.
- If you think the market will go down, hit bottom, and then start to rise again in the next three months, you need to be able to explain why you think it will go down, hit bottom, and then start to rise again.
- Being right is less important than being able to show logical thinking.
- Do some research before your interview. Read what big newspaper writers are saying and predicting, and then use some of their reasons to support your own.
- Also, be sure to stick to your reasoning. Your interviewer may challenge your position and question your reasoning. If you have to give a good reason for your answer, stand by what you say and try to explain why you think that way. If the way you think and reason makes sense, don’t change your mind just to please the interviewer.
How do you value a private company?
- You can use the same methods to figure out the value of a private company as you would a public one, with a few caveats. For example, since the company is not traded on the stock market, you can’t use a straight market valuation. If a DCF doesn’t have an equity beta, it can make figuring out the WACC harder. For this case, you need to use a close comparable stock’s equity beta in your WACC calculation.
- It’s harder to find financial information about private companies because they don’t have to file online with the government.
- Once the comparable companies are held publicly, analysts may lower the value of one company compared to the others. This is because investors in a public company will pay an extra 10 to 15 percent for the liquidity they enjoy when investing in a public company.
Equity Research Analyst Interview – 7 Important Tips
FAQ
How to prepare for an investment research interview?
How to interview for an investment analyst position?
What is an investment research analyst?
What is an investment analyst interview question?
This specific question allows an interviewer to gauge the skills and experience you possess to construct a presentation. An investment analyst often presents data to management personnel and other companies.
How do I prepare for an investment interview?
Research the company you are interviewing with, understand their investment philosophy, and familiarize yourself with the latest industry news and trends. This will not only help you answer questions more effectively but also enable you to ask intelligent questions during the interview, showcasing your genuine interest and enthusiasm.
Do equity research interviews overlap with investment banking and hedge fund interviews?
However, equity research interviews often overlap with investment banking and hedge fund interviews as general finance/accounting questions can also be asked. To check out an additional 45 technical questions with sample answers, check out WSO’s free 101 Investment Banking Interview Questions and Answers and Hedge Fund Interview Questions pages.
What questions do employers ask when applying for an investment analyst position?
When applying to any entry-level investment analyst position, employers may ask this question to gauge your interests and short- and long-term goals.
