NISM Series XV: Research Analyst Certification is essential for professionals working as research analysts. Below are 100 model questions across key topics covered in the exam, such as securities analysis, valuation, regulations, and ethics.
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I. Securities Analysis (30 Questions)
1. What is the primary objective of fundamental analysis?
2. Explain the difference between growth investing and value investing.
3. Define the term earnings per share (EPS) and its significance.
4. How is the debt-to-equity ratio calculated, and what does it indicate?
5. What are the three components of the DuPont analysis?
6. What is the significance of operating profit margin in financial analysis?
7. How do analysts use the Price-to-Earnings (P/E) ratio to value stocks?
8. Define book value per share and its importance in equity research.
9. What are the limitations of the Price-to-Book (P/B) ratio?
10. Explain the difference between systematic risk and unsystematic risk.
11. What does a beta coefficient greater than 1 indicate about a stock?
12. Define free cash flow (FCF) and its use in valuation.
13. What are cyclical stocks? Provide examples.
14. Explain the importance of interest coverage ratio in credit analysis.
15. What is meant by margin of safety in stock investing?
16. How do macroeconomic factors like GDP growth impact equity valuation?
17. What is the Altman Z-score? How is it used to predict bankruptcy?
18. Differentiate between leading indicators and lagging indicators in economics.
19. Explain the concept of discount rate in valuation.
20. What is DCF (Discounted Cash Flow), and how is it applied in equity research?
21. Describe the top-down approach of stock analysis.
22. What is the role of sectoral analysis in equity research?
23. Explain the difference between primary market and secondary market.
24. Define market capitalization and its categories (large-cap, mid-cap, etc.).
25. What is intrinsic value in fundamental analysis?
26. Define dividend yield and its relevance for income-focused investors.
27. Explain the significance of net profit margin in financial analysis.
28. What are compound annual growth rate (CAGR) and its uses?
29. Describe the moving average and its importance in trend analysis.
30. What is the difference between absolute return and relative return?
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II. Valuation Models (20 Questions)
31. What is the Dividend Discount Model (DDM)?
32. Differentiate between single-stage DDM and multi-stage DDM.
33. How is the Enterprise Value (EV) calculated?
34. What is EV/EBITDA ratio, and why is it widely used?
35. Describe the use of comparable company analysis in valuation.
36. Define residual income model and its application.
37. How does the Capital Asset Pricing Model (CAPM) determine the required rate of return?
38. Explain the Gordon Growth Model (GGM) for stock valuation.
39. What is economic value added (EVA), and how is it calculated?
40. Describe the relative valuation approach and its advantages.
41. Explain the concept of terminal value in a DCF model.
42. What is sensitivity analysis, and why is it performed in valuation?
43. How are multiples like P/E or EV/EBITDA used in peer comparison?
44. What are the key assumptions of the CAPM model?
45. How is WACC (Weighted Average Cost of Capital) calculated?
46. Describe the sum-of-the-parts (SOTP) valuation method.
47. What is the role of scenario analysis in valuation?
48. Explain the relative strength index (RSI) as a valuation tool.
49. Define cost of equity and how it impacts valuation.
50. What is the significance of risk-free rate in financial models?
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III. Regulatory Framework (20 Questions)
51. What is the role of SEBI in regulating research analysts?
52. Define the term fiduciary duty.
53. What are the mandatory disclosures required by research analysts under SEBI regulations?
54. How should research reports handle conflicts of interest?
55. What is the penalty for non-compliance with SEBI's research analyst guidelines?
56. Explain the concept of Chinese walls in financial institutions.
57. What is insider trading, and how is it regulated in India?
58. Describe the guidelines on independent research.
59. Define proxy voting advice and its regulation.
60. What is SEBI’s stance on remuneration of research analysts?
61. Explain the procedure for registering as a SEBI-approved research analyst.
62. What are the key ethical principles required by SEBI?
63. Define material non-public information (MNPI).
64. Explain the importance of fair presentation in research reports.
65. What is the scope of non-audit services under SEBI regulations?
66. What are the legal consequences of misrepresentation in financial analysis?
67. How do SEBI regulations address soft-dollar arrangements?
68. Define third-party funding disclosure requirements.
69. Explain the restrictions on personal trading for research analysts.
70. What are SEBI's requirements regarding client grievance redressal mechanisms?
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IV. Ethics and Professional Conduct (30 Questions)
71. Define conflict of interest, and how can it be mitigated?
72. What is the role of ethics in equity research?
73. How does bias impact the accuracy of research reports?
74. Define integrity in the context of research analysis.
75. What is the significance of diligence in equity research?
76. Explain the term objectivity in financial analysis.
77. Why is independence of research critical for credibility?
78. What are ethical boundaries in client interactions?
79. Define misrepresentation and its consequences.
80. Explain plagiarism and its impact on research credibility.
81. What is client confidentiality, and how is it maintained?
82. What is the role of compliance officers in upholding ethics?
83. Define churning in trading and its ethical implications.
84. What is the Code of Conduct for research analysts?
85. Why should analysts avoid making forward-looking statements without evidence?
86. Define the term benchmarking bias.
87. How should research analysts deal with pressure from clients or employers?
88. Explain the significance of transparency in financial reporting.
89. What are whistleblowing policies, and why are they important?
90. How can analysts ensure the verifiability of their research?
91. Define ethical dilemmas and their resolution strategies.
92. What is the role of professional bodies in upholding ethical practices?
93. How does overconfidence impact an analyst’s recommendations?
94. Explain data integrity and its importance in analysis.
95. Why should research analysts avoid selective disclosure?
96. Define corporate governance, and why is it important?
97. How can bias in company analysis be avoided?
98. What is the role of self-regulation in professional conduct?
99. Define professional skepticism in equity research.
100. Explain the ethical considerations of publishing revised reports.
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These questions broadly cover NISM XV's syllabus. Practice with these questions and focus on understanding concepts, as the exam evaluates both knowledge and practical application.