1. Many market participants believe that sell-side analysts are too optimistic in their stock recommendations, and too slow to recommend sells. Critically discuss factors which have been shown to contribute to analysts’ bias.
2. James Alexander works as a sell-side analyst for an investment bank that offers both underwriting and brokerage services. James sends you a highly favourable report on a stock that his investment bank recently helped go public and for which it currently makes the market. What are the potential advantages and disadvantages in relying on his report in deciding whether to buy the stock?