Suggestions for Modern Security Analysts
14 Pages Posted: 28 Apr 2010 Last revised: 21 Apr 2015
Date Written: April 12, 2010
The field of Security Analysis has generally come to embrace the theories of modern economics, seemingly without adequate consideration for how to bridge the gap between theory and practice. The consequences of this, most recently experienced in the 2007-2008 financial crisis, have been significant. To help rectify this we provide practical suggestions for modern security analysts to consider, which center on four key areas. First is obtaining a working knowledge of financial/economic history, which will help put security analyses into context. The collapse of Long-Term Capital Management in the late 1990s is compared to recent events experienced during the financial crisis as an example. We also suggest that a multi-discipline analytical framework, which incorporates a common-sense approach to risk management, be adopted along with contrary thinking, and an understanding of - and appreciation for - market complexity. Cumulatively, these suggestions could lead to more insightful analyses and profitable investments at lower levels of risk over time.
Keywords: Valuation, Investments, Security Analysis, Risk Management
JEL Classification: G10, G24
Suggested Citation: Suggested Citation