Equity Research interview preparation

Questions

100

Traced to a firm

72

Firms

45

Updated

September 2026

Asked at

All firmsMorningstar12Man Group6Balyasny Asset Management5BLBlackRock5FTFranklin Templeton5MSCI5Jefferies4CSCredit Suisse3Fidelity Investments3Moody's3Perella Weinberg Partners3Point723S&P Global3The Vanguard Group3WMWellington Management3Advent International2Apollo Global Management2Bank of America2Carlyle Group2DED.E. Shaw2Houlihan Lokey2HSBC2Piper Sandler2Sequoia Capital2SSState Street2Viking Global Investors2WBWilliam Blair2ACAQR Capital Management1BGBaupost Group1BMBNY Mellon1Centerview Partners1Coatue Management1Goldman Sachs1GSGuggenheim Securities1HWHarris Williams1Insight Partners1Invesco1Mizuho1Moelis & Company1MSMorgan Stanley1PIMCO1SCSchroders1Scotiabank1T. Rowe Price1TSTruist Securities1

Topic

All topicsResearch process9Stock pitch6Company analysis8Investment philosophy5Valuation14Modelling2Portfolio and risk8Macro8Sector knowledge2Accounting8Career and fit12Industry knowledge6Quantitative research1Sector: technology3Sector: consumer1Sector: healthcare1Sector: energy1Sector: financials2Sector: industrials1Case and estimation2

Level

AnyCoreIntermediateHard

Type

AnyTechnicalCaseFitBrainteaserMarket view

1. 067What is tracking error and how do you calculate it?Portfolio and riskIntermediatetechnicalMSCIFinancial Tools · Monterrey · 2013

   Say this

   The standard deviation of the difference between the portfolio's returns and the benchmark's. It measures how far a portfolio can drift from its index, and it is the budget within which an active manager operates.

   Then walk it

   1. Calculate the active return each period, portfolio minus benchmark, then take the standard deviation of that series, usually annualised.
   2. Ex-post tracking error uses realised returns. Ex-ante uses a risk model to forecast it from current holdings, which is what a risk system reports daily.
   3. Typical levels: an index fund runs a few basis points, an enhanced index strategy 1 to 2 percent, an active manager 4 to 8 percent, and a concentrated high-conviction fund can be well above that.
   4. It connects to the information ratio, which is active return divided by tracking error. That ratio, not raw outperformance, is how skill per unit of risk is judged.
   5. The main use is as a constraint: a mandate sets a tracking error budget, and the manager allocates it to the positions with the highest expected information ratio.
   6. The subtlety worth naming: tracking error is symmetric, so it penalises outperformance as well as underperformance. A manager can have excellent returns and breach a tracking error limit, which is why the constraint sometimes forces suboptimal decisions.

   Where candidates lose it

   Confusing it with volatility. Tracking error is the volatility of the difference, not of the portfolio. A low-volatility portfolio can have very high tracking error against a volatile index.

   Expect next

   • What is the information ratio?
   • What tracking error would you expect from a concentrated fund?
   • How does a tracking error budget change portfolio construction?

   Reported by candidates at MSCI (Financial Tools, Monterrey, 2013). Source: Wall Street Oasis.

2. 070How would you build a portfolio for clients with different needs and requirements?Portfolio and riskIntermediatetechnicalThe Vanguard GroupInvestment Research · Malvern · 2024ScotiabankSales and Trading · Toronto · 2025

   Say this

   Start from the liability, not the assets. What is the money for, when is it needed, and what loss can the client tolerate without abandoning the plan? Then build the allocation to match, and only then pick instruments.

   Then walk it

   1. Establish the objective and the horizon. A retirement pot 30 years out and a house deposit in two years require opposite portfolios regardless of the client's stated risk appetite.
   2. Separate risk capacity from risk tolerance. Capacity is what their circumstances can absorb; tolerance is what they can emotionally sustain. Build to the lower of the two, because a portfolio abandoned in a drawdown fails whatever its expected return.
   3. Set the strategic asset allocation across equities, fixed income, and any alternatives or real assets. This is the decision that matters most.
   4. Then the constraints: tax status and the right account wrappers, liquidity needs, existing concentrated positions, currency exposure, and any ethical restrictions.
   5. Then instrument selection, favouring low-cost broad exposure as the core, with active or satellite positions only where there is a reason to expect an edge.
   6. Then the governance: a rebalancing rule, a review schedule, and a written plan for what happens in a drawdown. Agreeing the behaviour in advance is the single highest-value thing an adviser does.

   Where candidates lose it

   Starting from products and risk questionnaires. The professional sequence is objective, then capacity and tolerance, then allocation, then instruments. Also failing to distinguish capacity from tolerance, which is the distinction that actually protects clients.

   Expect next

   • How would that differ for a 25-year-old and a 65-year-old?
   • How do you handle a client with a concentrated stock position?
   • What do you do when a client wants to sell in a crash?

   Reported by candidates at The Vanguard Group (Investment Research, Malvern, 2024); Scotiabank (Sales and Trading, Toronto, 2025). Source: Wall Street Oasis.

Firm tags come from public, anonymous candidate reports on Wall Street Oasis: strong signal, not sworn testimony. Firms are named as the places a question was reported, not as partners of Fin Maverick. Answers are written for this page to show how to think out loud; they are not scripts to recite.