Analyst Sponsorship

  

Most brokerages employ analysts. (See sell-side analyst for details.) Despite being wrong quite often, these analysts continue to write opinions about stocks and publish financial models. And Wall Street still listens, even though they know their track record. Stock brokerages even pony up money in trading dollars and commissions for these guys—much like your local weather channel continues to pay for the meteorologist who's only right about 30% of the time.

Analyst sponsorship happens when an analyst gives a thumbs-up, positive review of a stock. When that happens, the stock usually goes up. If the sell-side analyst works for a big brokerage like Goldman, he or she can have an especially big impact on a stock. Dolla dolla billz, y'all.

Related or Semi-related Video

Finance: What Does a Financial Analyst D...320 Views

00:00

what does a financial analyst do? well this and this and this.

00:10

so after all that analyzing of financial data what does the analyst actually do?

00:15

well she makes recommendations to you know do stuff. generally so that [man frowns at camera]

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investors can make money or not lose money. and to be clear financial analysts

00:25

come in a few different flavors. pick an analyst who works for a stock brokerage

00:28

for example. well they produce reports which the brokerage then gives to

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clients hoping that it will incentivize its clients to trade with the firm and

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give the firm its business, which of course generates commission for the

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stock brokers in theory. the goal here is to make money for the client. but the

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more near-term goal is to you know get the client to pay attention to the firm.

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this is a subtle but very important difference from a financial analyst who [one man stands behind another and shouts]

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works for an investment company ie one who actually invests money for clients

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and is evaluated based on the performance of those investments. a

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financial analyst inside of an investment company like fidelity or

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Franklin or American Funds cares only about how well the investment does. the

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financial analyst does not have to juggle clients or worry about marketing

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to non-professional investors or generating commissions for the firm. all

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they have to worry about is beating the market or their index or whatever

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benchmarks are set out there for them .in addition there are two flavors of [woman hits punching bag]

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financial analysts on Wall Street more or less .by side -those are extensions of

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hedge funds and private equity funds and venture capital funds and mutual funds-

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they're all the people who analyze things from the perspective of a buyer

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only like they buy the stuff they don't have to keep clients happy and get

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Commission business. then you have the sell side which are largely just [graph showing stocks]

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extensions of stockbrokers. stockbrokers hire the analyst to give smart opinions

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on buying selling and holding stocks such that well they can go talk to their

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clients about it and win Commission business from getting them to trade

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through them by recommending Microsoft at forty two dollars and twelve cents

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and stuff like that. there are financial analysts who work for the government as

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well. these guys are usually housed in hell-like divisions of the government

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called the Fed which assesses whether or not the [man in dark glasses behind computer]

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economy is heating up cooling down or see-sawing like a spring day in Chicago.

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well here a financial analyst might be sampling the prices of a half gallon

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carton of GMO milk at 500 grocery stores around the country. they then use that

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data to figure out if the country is feeling inflation deflation or just

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boredom .financial analysts exist inside of corporations as well.

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corporate analysts perform market evaluations to try to help companies [man smiles at camera]

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sell more product for more profit which in turn fuels the company's growth and

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all that other fun stuff. so yes being a financial analyst might not be the

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flashiest job in the world but just think about all that Ben and Jerry's you

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can buy once your commission comes through. [people cheer the ice cream truck]

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