We the unwilling, led by the unknowing, are doing the impossible for the ungrateful. We have done so much for so long, with so little knowledge that we will one day qualify to do anything knowing nothing. Be proud to be an ANALYST.
The above preamble was sent by an analyst through email among an analyst e-group. Below is my response to this preamble.
Dr. K.V.S.S. Narayana Rao
I appreciate this preamble.I published a paper arguing that the text books on security analysis were not written properly and I circulated this paper to all text book authors in USA. After we study a text we cannot do an analysis in which we have confidence. I feel in this respect technical analysis is much better. Fundamental analysis is described in very ambiguous manner. Financial forecasting is not covered properly in the texts. DCF model is criticisized in the texts. There is no adequate explanation of determining target prices.
But the work being done by analysts "led by the unknowing" is useful to convey some useful and valuable information to the traders and investors. That is why research departments are being maintained. Many of us join the departments not unwillingly, but with a big hope.
To improve the analytical part, my proposal is that the analytical methods are documented in a such a detailed manner, that every investor and trader can understand the methodology. That does not mean every investor and trader can do his own analysis. Analysis to identify one share that satisfies a specified analytical method requires analysis of a large number of shares. This is time consuming. Hence professional analysts come out with research reports on those scrips which pass the screening test of the method. Because investor/trader knows the method he can study the report, convince himself that the analysis is appropriate and do his trading/investment with conviction. Such an approach and attidue on the part of analyst community will reduce ambiguity to some extent, and we will all be more comfortable psychologically in our participation in this activity which is basically a risky situation. What I mean by risky situation is that our judgments are sometimes right and sometimes wrong. We are the same persons, our methods are same, but sometimes they succeed and sometimes they fail. People laugh at us and criticize when we fail.
Thanks to the analyst for bringing out an issue that troubles some of us.