Has a research report adequately outlined the risk factors, or failed to analyze less optimistic scenarios?
The CFA Program tends to place a great deal of emphasis on analyzing risk and protecting the investing public from downside risk as a result of the actions of its members. A derivative or synthesized product, for example, may be excessively risky in periods of rising interest rates, and if a research report recommending the security simply assumes that interest rates will fall, the report is in violation of this Standard. • Does a research report omit the analyst’s real reason for making a specific recommendation? For example, Wall Street observers in recent years have coined the term “whisper number” to refer to a quarterly earnings-per-share (EPS) result or quarterly revenue number that some analysts (if not a consensus of analysts) believe is most likely for the firm in question. However, since none of the leading experts covering a stock are prone to updating EPS projections, the public consensus estimate for quarterly earnings remains the same. If an analyst chooses to upgrade a c
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