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. 026What makes up a fund's net asset value?Industry knowledgeCoretechnicalMan GroupEquity Hedge · Boston · 2019

   Say this

   The market value of everything the fund owns, less everything it owes, divided by units outstanding. Assets are the positions plus cash and receivables; liabilities are shorts, borrowings, accrued fees and payables.

   Then walk it

   1. Assets: the mark-to-market value of long positions, cash, margin held at the prime broker, dividends and interest receivable, and unrealised gains on derivatives.
   2. Liabilities: short positions valued at market, leverage and margin borrowings, accrued management and performance fees, redemptions payable, and unrealised losses on derivatives.
   3. Divide the net figure by units outstanding to get NAV per unit. That per-unit figure is what investors subscribe and redeem at.
   4. The judgement sits in valuation. Liquid listed equities are straightforward. Illiquid or level three assets are marked to model, and that is where NAV becomes an estimate rather than a fact.
   5. Which is why the practical questions matter: who strikes the NAV, how often, and is there an independent administrator? A manager marking its own illiquid book is a governance concern, and saying so shows you understand why the question is asked.

   Where candidates lose it

   Giving the formula and stopping. The interesting content is valuation of illiquid positions and the role of the independent administrator. That is what an operations-aware investor actually cares about.

   Expect next

   • How do you value a level three asset?
   • Who strikes the NAV?
   • What is a side pocket?

   Reported by candidates at Man Group (Equity Hedge, Boston, 2019). Source: Wall Street Oasis.

2. 029How do you construct a factor, and how would you decide whether it is real?Quantitative researchHardtechnicalACAQR Capital ManagementInvestment Research · New York · 2021

   Say this

   Define the signal, rank the universe on it, form long-short portfolios from the extremes, and measure the spread after controlling for known factors. It is real only if it survives transaction costs, out-of-sample testing and an economic explanation.

   Then walk it

   1. Construction: choose the metric, neutralise for size, sector and region so you are not just picking up a sector bet, then sort into quantiles and go long the top and short the bottom with rebalancing at a defined frequency.
   2. Measure the spread return, its volatility, the information ratio, and the turnover it requires. Turnover matters because a signal that needs daily rebalancing can be profitable on paper and unprofitable after costs.
   3. Control for known factors. If your new signal's returns disappear once you regress against value, momentum, quality and size, you have rediscovered an existing factor with a new name.
   4. Then the tests that actually matter: out-of-sample and out-of-region performance, stability across sub-periods, and how many specifications you tried before finding this one. Data mining is the default explanation for any new factor.
   5. And demand an economic story. A factor should be compensation for a risk, or exploitation of a behavioural bias, or a structural constraint on other investors. Without that, decay after publication is the base case.
   6. The honest position: most published factors do not survive replication, so the prior on any new one should be skeptical.

   Where candidates lose it

   Describing the mechanics with no discussion of multiple testing and data mining. The intellectual content of modern factor research is that backtests are easy and robustness is hard. Say so.

   Expect next

   • How would you optimise the construction?
   • Why do factors decay after publication?
   • How would you know if you had overfitted?

   Reported by candidates at AQR Capital Management (Investment Research, New York, 2021). Source: Wall Street Oasis.

3. 031How do you decide when to sell?Portfolio and riskHardsuperdayAsset managementHedge funds

   Say this

   Three reasons and only three: the thesis played out and the price reflects it, the thesis is broken, or something better came along. Never sell because the price fell, and never hold because you are down.

   Then walk it

   1. Thesis achieved: the variant view became consensus and the upside to your revised target is no longer compelling. This is the happy case and people systematically sell too early here.
   2. Thesis broken: the specific thing you said would happen did not, or a fact you relied on turned out false. This should trigger a sale regardless of price, and it is where writing down the falsifier in advance pays for itself.
   3. Better use of capital: opportunity cost. In a concentrated portfolio every new idea must displace something, which imposes useful discipline.
   4. What is not a reason: the price fell, so it is cheaper now. That is only a reason to buy more if the thesis is intact, and only if you have checked rather than assumed.
   5. The behavioural safeguards: a written thesis with falsifiers, a scheduled review after every result, and a rule that you re-underwrite a position from scratch rather than defending your existing note.
   6. And separate trimming from selling. Reducing on valuation while the thesis compounds is a different decision from exiting, and conflating them is how people sell their best ideas.

   Where candidates lose it

   Giving a price-based rule like a fixed stop loss as the whole answer. For fundamental investing, the sell decision is thesis-based. Stops are a risk management overlay, not a research judgement, and saying only that reveals a trader's frame in a research seat.

   Expect next

   • How do you avoid selling winners too early?
   • Do you use stop losses?
   • How do you re-underwrite a position?
4. 032How do you size a position?Portfolio and riskHardsuperdayHedge fundsAsset management

   Say this

   By conviction and by downside, not by expected upside. The question is how much you lose if you are wrong, multiplied by how likely that is, against the portfolio's tolerance for that loss.

   Then walk it

   1. Start from the downside. If the bear case is minus 40 percent and you would be uncomfortable losing more than 2 percent of the fund on one name, the position is capped at about 5 percent.
   2. Then conviction, which really means how confident you are in the analysis and how falsifiable it is. A thesis with a clear near-term test supports a larger position than one that depends on a five-year structural view.
   3. Then correlation. Three positions expressing the same macro view are one position. Sizing has to be done at the portfolio level or you accumulate hidden concentration.
   4. Then liquidity: how many days of average volume is the position, and can you exit it in a stressed market? Illiquidity is a real constraint on size regardless of conviction.
   5. The Kelly criterion is the theoretical frame, but full Kelly is far too aggressive in practice because you cannot estimate probabilities that precisely. Most investors run a fraction of it, and saying that shows you know the theory and its limits.
   6. In a multi-manager seat, most of this is imposed by the risk system anyway, and the analyst's job is to argue for the sizing within those limits.

   Where candidates lose it

   Sizing by upside. Everyone's best idea has the most upside, and sizing on that alone is how funds blow up. Downside and correlation are the content of a real answer.

   Expect next

   • What is your maximum position size?
   • How do you handle correlated positions?
   • Would you add to a loser?
5. 036How would you forecast revenue for a company you have never modelled before?ModellingIntermediatetechnicalHoulihan LokeyInvestment Banking · New York · 2026

   Say this

   Build it from drivers, never from a growth rate. Find the two physical quantities that multiply to revenue, price and volume in some form, then forecast each separately against something observable.

   Then walk it

   1. Decompose first. A retailer is stores times sales per store. An airline is available seat miles times load factor times yield. A software business is customers times average revenue per customer. A bank is loan balances times net interest margin.
   2. Forecast each driver against something external: industry capacity, population, disposable income, an installed base, a contract backlog. That makes the forecast falsifiable and lets you update it when the external data moves.
   3. Cross-check top-down. If your bottom-up build implies the company takes six points of market share in two years, you need a reason. Reconciling bottom-up to market size is the sanity check that catches most bad models.
   4. Separate organic from acquired growth. A company growing 15 percent of which 10 is bought is a completely different business from one growing 15 organically, and blending them hides that.
   5. Then sanity-check against history: is the implied growth faster than the company has ever achieved? If so, say why this time is different, or lower it.
   6. A flat growth-rate assumption is acceptable only in the terminal years, and even then you should say what it implies.

   Where candidates lose it

   Applying a growth percentage to last year's revenue. It cannot be argued with, cannot be updated by new data, and gives you no basis for a variant view. Driver-based building is the entire point.

   Expect next

   • What is the driver for the company we cover?
   • How do you reconcile bottom-up to market size?
   • Where does your forecast differ from consensus?

   Reported by candidates at Houlihan Lokey (Investment Banking, New York, 2026). Source: Wall Street Oasis.

6. 037How would you model a subscription software business, and what metrics matter?Sector: technologyHardtechnicalInsight PartnersSoftware · New York · 2022Piper SandlerInvestment Banking · Burlingame · 2026

   Say this

   Model the recurring revenue base by cohort rather than the income statement. Opening ARR, plus new, plus expansion, less churn and downgrades, gives closing ARR. Everything else follows from that roll-forward.

   Then walk it

   1. The ARR bridge is the model. Once you have opening ARR, new bookings, expansion and churn, revenue is largely determined, because recognised revenue is a lagging function of the contracted base.
   2. Key metrics: net revenue retention, gross retention, gross margin, customer acquisition cost payback, and the rule of forty which is growth plus free cash flow margin.
   3. Net retention above 110 percent is the single most important number, because it means the installed base grows without selling anything new. That is what justifies a high revenue multiple.
   4. Watch the gap between billings, revenue and deferred revenue. Billings lead revenue, so a slowdown shows up in billings a quarter or two before it hits the reported line. That is often where the variant view lives.
   5. Cost side: gross margin tells you how much real compute or support sits in cost of revenue, sales and marketing efficiency tells you whether growth is bought or earned, and R&D as a share of revenue tells you about future product.
   6. And take stock-based compensation seriously, because in software it is large enough to determine whether the company is profitable at all.

   Where candidates lose it

   Modelling revenue directly and ignoring the ARR bridge and deferred revenue. Also quoting the rule of forty without knowing whether it uses free cash flow margin or operating margin, since the two give very different answers.

   Expect next

   • What is the rule of forty?
   • Why do billings lead revenue?
   • What net retention would justify a 10 times revenue multiple?

   Reported by candidates at Insight Partners (Software, New York, 2022); Piper Sandler (Investment Banking, Burlingame, 2026). Source: Wall Street Oasis.

7. 038What is the rule of forty, and what are its weaknesses?Sector: technologyIntermediatetechnicalTechnology coverageGrowth equity

   Say this

   Revenue growth plus profit margin should exceed 40. It says a software company can be forgiven for losing money if it is growing fast, or for growing slowly if it is profitable, but not both.

   Then walk it

   1. The logic is a trade-off: spending on growth suppresses margin, so the combined figure measures whether that spend is productive.
   2. The first weakness is the margin definition. Free cash flow margin, operating margin and EBITDA margin give very different scores for the same company, and firms naturally quote the flattering one.
   3. The second is that it treats a growth point and a margin point as equivalent. They are not: for a long-duration asset, a point of durable growth is worth far more than a point of margin, because it compounds.
   4. The third is that it ignores the quality of the growth. Growth bought through acquisitions, or through discounting that damages net retention, scores the same as organic growth from pricing.
   5. And it says nothing about durability. A company at 60 today that decelerates sharply next year is worth less than a steady 42.
   6. So I would use it as a screen to compare companies quickly, never as a valuation input. The valuation question is always durability, and the rule of forty is silent on it.

   Where candidates lose it

   Quoting the heuristic without a critique. Anyone can state it. Naming the margin-definition problem and the growth-versus-margin asymmetry is what shows you have used it rather than read it.

   Expect next

   • Which margin would you use?
   • Would you rather have 20 percent growth at 20 percent margin, or 40 percent growth at breakeven?
   • How do you assess durability of growth?
8. 042How do you normalise earnings for a cyclical company?ValuationHardtechnicalFTFranklin TempletonOil and Gas · San Mateo · 2024

   Say this

   Estimate what the business earns through an average cycle, not at either extreme. Take mid-cycle volumes and mid-cycle margins, adjusted for any structural change since the last cycle, and value that.

   Then walk it

   1. Method one: average the margin over a full cycle, usually seven to ten years, and apply it to current revenue. Simple and defensible.
   2. Method two: estimate mid-cycle volume and mid-cycle price separately, then rebuild the income statement. More work, but it lets you adjust each independently.
   3. Method three: normalise on the balance sheet instead, using return on invested capital through the cycle applied to today's capital base. Useful when volumes have changed structurally.
   4. The critical adjustment: has anything structural changed since the last cycle? Capacity closures, consolidation, a new cost position, or demand substitution mean history is not a clean guide. This is where the analysis is.
   5. Then apply a mid-cycle multiple to the normalised figure. The common error is applying a peak multiple to normalised earnings, or a normalised multiple to peak earnings; the two must be consistent.
   6. And show the earnings range rather than a point. For cyclicals the honest output is a value at trough, mid and peak, with a probability view on where in the cycle we are.

   Where candidates lose it

   Normalising the earnings but not the multiple, or ignoring structural change and treating the last cycle's average as destiny. Consistency between the earnings base and the multiple is the whole discipline.

   Expect next

   • How do you know where in the cycle you are?
   • What has structurally changed in that industry?
   • Why do cyclicals look cheapest at the top?

   Reported by candidates at Franklin Templeton (Oil and Gas, San Mateo, 2024). Source: Wall Street Oasis.

9. 043Why can a stock fall on an earnings beat?Research processIntermediatetechnicalLong-short funds

   Say this

   Because the reported number is not what was priced. The market trades on the buy-side whisper and on forward guidance, so a company can beat published consensus and still disappoint on both.

   Then walk it

   1. Published consensus lags. The real bar is the buy-side expectation, which is usually higher into a strong quarter and is not in any database.
   2. Guidance matters more than the quarter. A beat paired with unchanged full-year guidance implies a cut to the rest of the year, and the market does that arithmetic immediately.
   3. Quality of the beat: driven by a lower tax rate, a one-off gain, or a buyback reducing share count is very different from a beat on volume and price. The market discounts low-quality beats.
   4. Forward indicators can contradict the headline: billings, backlog, bookings, orders. A revenue beat with deteriorating bookings is a sell.
   5. Positioning: if everyone already owns it into the print, there is no marginal buyer. A crowded long needs a large beat just to hold its level.
   6. So the framework for a research analyst is always the expectations gap, and the most useful pre-results work is establishing where the buy-side bar actually sits, not what the screen says consensus is.

   Where candidates lose it

   Treating published consensus as the bar. The gap between published consensus and the buy-side whisper is exactly what this question is about, and naming it is the mark of someone who has watched results days.

   Expect next

   • How do you find out where the buy-side bar is?
   • What is a low quality beat?
   • How do you position into a print?
10. 044What is a reverse DCF and why would you use one?ValuationHardtechnicalLong-only asset management

    Say this

    You hold the market price fixed and solve for the assumptions it implies, instead of producing your own value. It converts valuation from a number into a testable statement about what the market believes.

    Then walk it

    1. Mechanically: set the DCF output equal to the current market capitalisation, then solve for the revenue growth or margin that makes it balance, holding everything else at reasonable levels.
    2. The output is a sentence like: at this price the market is assuming 12 percent revenue growth for a decade and a 25 percent terminal margin.
    3. Then you can make a judgement that is actually falsifiable. Has any company in this industry sustained 12 percent for a decade? How many did, historically? That turns an opinion into a base rate question.
    4. It also removes the main criticism of a forward DCF, which is that you can produce any number you want by choosing assumptions. Here the market chose them; you are only judging them.
    5. It is especially useful for expensive growth stocks, where a conventional DCF is unpersuasive to anyone who does not already share your assumptions.
    6. The limitation: it still depends on your discount rate and terminal assumption, so it constrains the problem rather than solving it. But 'the price implies something only three companies in history have achieved' is a far stronger argument than 'my model says it is worth less'.

    Where candidates lose it

    Describing it as just a DCF run backwards without explaining why it is more persuasive. The point is rhetorical as much as analytical: it shifts the burden of proof onto the market's assumptions.

    Expect next

    • What does the reverse DCF say about a stock you follow?
    • How many companies sustain that growth rate historically?
    • What are its limitations?

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.