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Reconciling analyst's views

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You are a junior analyst at a well-known mutual fund company (i.e., a buy-side analyst) and are assigned to value, say, the stock of General Electric. You look around at what famous analysts have written and you find one who says that the stock is overpriced at its current price (roughly $42/ share as of October 9, 2007). Another, not surprisingly, thinks that the stock is a strong buy, with a target price of $60. You know you will be asked about these views when you present your results. How might you go about reconciling them?

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Reconciling analyst's views

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The differences in views of analysts about a stocks is not surprising. Several factors can create pressure on an analyst's independence and objectivity, which results in different views about a same stock from different analysts. For example, analysts are often biased towards stocks in which their parent firms have significant interests, either in terms of historical investment banking or underwriting relationship or ongoing ...

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