Book Review: Wall Street Research
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Sell-side research is often seen as a competition among analysts for top rankings in surveys of investors. From time to time, scandals cause the profession to be viewed through the prism of ethical standards. Even the celebrity culture now colors perceptions of the analytical profession. In Wall Street Research: Past, Present, and Future, Boris Groysberg and Paul M. Healy of the Harvard Business School adopt the market for sell-side research as their framework. Oddly, this perspective is rarely used by brokerage industry types, who are otherwise thoroughly immersed in markets.
Brokerage houses tend not to think of research as a service bought and sold in a market because their ambition is to sell securities, not security analysis. The firms must nevertheless recover the costs of producing research. Prior to the US SEC’s abolition of fixed commission rates on 1 May 1975, broker/dealers paid for their teams of industry-specialized security analysts by bundling research with execution services. That worked well under pre–“May Day” commissions of 20–30 cents a share but proved unviable when those rates declined precipitously in the late 1970s.