Structured Securities Analysts Are Bad For You

This morning I got to pondering as I was scanning Institutional Investor magazine’s list of the top banking firms for analyst research in structured securities. Those analysts, of course, are the folks that opine on current powder kegs like asset-backed securities, etc.

So, my question: Did the firms with the best research teams in structured securities do best as stocks during the the credit downturn from July 1st to August 15th? In other words, was the advice from the best teams followed by their own employers?

Well, by way of one answer, here is the average decline during the above period for the top and bottom five banks in structured securities research, as ranked by II:

  • Top 5: -16.7%
  • Bottom 5: -10.4%

The firms employing the best analysts, as measured by II, had their stocks fall further than the teams employing the lower-ranked teams. Admittedly, correlation isn’t causation, but maybe this whole subprime thing has, in the end, been the damn analysts’ fault.

Full data is as follows:

Rank Company Ticker 7/1 – 8/15 8/15 – Present
1 JP Morgan JPM -10.6% 3.6%
2 Lehman LEH -30.6% 7.2%
3 Bear Stearns BSC -26.2% 4.4%
4 Bank of America BAC -1.3% 3.9%
5 UBS UBS -15.0% 1.5%
6 Goldman Sachs GS -23.8% 12.1%
7 Credit Suisse CS -10.7% 2.1%
8 Wachovia WB -11.1% 7.3%
9 Citi C -10.0% 0.8%
10 Merrill MER -17.1% 6.0%
11 Barclay’s BCS -9.8% -0.4%
12 HSBC HBC -4.1% 3.0%
Financial Sector XLF -11.1% 3.4%


  1. its a bit one-sided to look only at the recent fall in markets to test your hypotheses..
    on the other hand.. the analysts involved in structuring rarely any f..n clue of the risks involved. that should be the manager’s job, but he is driven by short term profit and greed.